Understand the complexities and nuances of the Bankruptcy Code to better advise clients and prepare for court.
By Daniel Gill
Dec. 9 — Curtis James Jackson, III, the rapper, actor and entrepreneur known as 50 Cent, has settled his malpractice claim against his former lawyers for $14.5 million, paving the way for closing his Chapter 11 bankruptcy case ( In re Curtis James Jackson, III , Bankr. D. Conn., No. 15-21233, Motion for Order Approving Settlement of Malpractice Claim 12/2/16 ).
Jackson filed a motion Dec. 2 in the U.S. Bankruptcy Court for the District of Connecticut, seeking court approval of his settlement with the law firm Garvey Schubert Barer (GSB) and four of the firm’s lawyers who represented Jackson in a losing arbitration related to the production and distribution of headphones which were to carry Jackson’s brand.
The settlement was reached in mediation and represents the largest source of cash to fund Jackson’s plan of reorganization, attorney Craig Weiner, special litigation counsel representing the bankruptcy estate in the malpractice case, told Bloomberg BNA Dec. 6.
Weiner, with Robins Kaplan LLP, New York, said that once the settlement is approved and the proceeds are delivered, unsecured creditors should receive a distribution of about 72 cents per dollar on their allowed claims. “We anticipate the bankruptcy case will be closed shortly thereafter,” he told Bloomberg BNA.
After contracting with Sleek Audio, LLC to manufacture and sell the headphones, Jackson and his related businesses terminated their agreement with Sleek, which sued Jackson, leading to the arbitration. Sleek ultimately prevailed in the arbitration and on Oct. 16, 2014, got a judgment against Jackson, according to the motion.
Jackson asserted claims against GSB including a claim for unauthorized practice in Florida and notified the firm of his intent to seek damages for malpractice and breach of fiduciary duty in January 2015.
Jackson commenced a Chapter 11 case on July 13, 2015. Chapter 11 allows companies (or individuals) to enjoy protections from creditors while they seek to reorganize their debt or liquidate pursuant to a plan which must be approved by the bankruptcy court.
Jackson filed a complaint Oct. 6, 2015, against GSB in the bankruptcy case.
The bankruptcy court confirmed Jackson’s plan of reorganization on July 7, 2016. Under the plan, Sleek was confirmed to hold an unsecured claim for about $17.3 million. The plan also provided (among other things) that unsecured creditors would receive a distribution of 70 percent of any recovery from the malpractice action.
Weiner told Bloomberg BNA that after distributions of the estate’s assets are made by the disbursing agent appointed under the plan, unsecured creditors should receive about $.72 per dollar of their allowed claims.
To contact the reporter on this story: Daniel Gill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
The motion and settlement agreement is available here: http://www.bloomberglaw.com/public/document/Curtis_James_Jackson_III_Docket_No_215bk21233_Bankr_D_Conn_Jul_13/1
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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