n">Oct 30 Junior creditors of Caesars Entertainment launched a fresh attack against a top U. S. restructuring attorney, alleging that James Sprayregen of Kirkland & Ellis misled a judge and asking that the law firm be disqualified from parts of the casino group's bankruptcy case.
Jones Day, the junior bondholders' law firm, asked the court to reconsider a May order that allowed the bankrupt unit of Caesars Entertainment Corp to hire Kirkland, led by Sprayregen.
The dispute between two of the best-known law firms in corporate restructuring adds another layer of feuding to Caesars' $18 billion bankruptcy, which involves the biggest U. S. private equity and hedge fund firms.
In a new court filing on Friday, Jones Day revealed evidence from a board meeting of the operating unit that it says shows testimony by Sprayregen at a trial over Kirkland's hiring by Caesars was incomplete and misleading.
Kirkland & Ellis denied the allegation and said it was without merit.
"Mr. Sprayregen testified truthfully and accurately at the retention hearing. Kirkland & Ellis is disinterested and fully qualified to represent the debtors, as the Bankruptcy Court previously ruled," the law firm said in an emailed statement. It said it is preparing a response.
Sprayregen, known as the "godfather of restructuring" for leading some of the biggest Chapter 11 cases, sparred with Jones Day's Bruce Bennett in the bankruptcy of the city of Detroit.
Jones Day initially filed a redacted version of the motion last week, but U. S. Bankruptcy Judge Benjamin Goldgar in Chicago rejected that for procedural reasons.
Junior creditors have been trying to prove that the Caesars parent and affiliate transferred the best properties out of the operating unit, which the junior creditors have said amounted to asset stripping.
A special governance committee of the bankrupt operating unit's board investigated the asset transfers and found them "constructively fraudulent."
However, rather than take legal action over those asset transfers, the operating unit's full board authorized a New York lawsuit to have the transfers declared legal. That would protect the parent company that now owns those top resorts at the expense of the operating unit, and the operating unit's creditors.
Stephen Lubben, a law professor at Seton Hall, said the confusion over Kirkland's role in representing the special committee may not be enough to disqualify firm, which would cost it millions of dollars in fees.
"But, again, this is not going to help relations in this case." (Reporting by Tracy Rucinski in Chicago and Tom Hals in Wilmington, Del.; Additional reporting by Jim Christie in San Francisco; Editing by Matthew Lewis)
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