Feb. 29 2024, Printed 5:37 p.m. ET
The federal decide overseeing the four-year Highland Capital Administration chapter case stated at a listening to earlier this month that the case will “go on perpetually.”
Events led by James Dondero, hedge fund supervisor of Dugaboy Funding Belief, have repeatedly sought the recusal of Stacey G.C. Jernigan, Chief Chapter Decide for the Northern District of Texas, citing bias. Jernigan is accused of writing a novel that includes a villain based mostly on Dondero and was implicated in insider buying and selling allegations linked to Amazon’s 2021 buy of MGM for $8 billion.
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The newest controversy within the Highland saga facilities on Dondero’s request for info regarding $122 million left within the reserve put aside by the property for extra authorized {and professional} charges, particularly amid giant, ongoing funds to court-appointed Highland Trustee James Seery.
Seery is incomes $150,000 per 30 days at some point of the case — a $1.8 million yearly wage — and attorneys for events led by Dondero imagine he might obtain further bonuses and advantages on high of that.
At a listening to in February, legal professionals for the Dondero events argued that the “case can finish,” they only want transparency. They imagine the additional money and belongings might settle money owed within the tens of tens of millions and allow a number of lessons of claimants to be meaningfully paid.
Legal professionals for the Dondero events stated it “defies perception that [the Debtor] might moderately spend” that $122 million on authorized {and professional} charges and is so unwilling to share monetary info.
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The Dondero events’ attorneys say Jernigan’s assertion that the case will “go on perpetually whether or not [the Dondero parties] get this info or not” signifies “a troubling barrier to justice.”
“The well-known quote of Walt Disney, when somebody requested him concerning the theme park and when it will be completed, and he stated, Disneyland won’t ever be completed so long as there are artistic individuals with imaginations. I imply, that is just like the Disneyland case. It’s going to by no means be completed so long as there are particular events and legal professionals who’ve creativeness and hold submitting stuff,” Jernigan stated on the February listening to.
Amazon product web page for “He Watches All My Paths: A Novel”
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The Dondero events argue Jernigan is complicit in draining a “solvent however diminishing property.” They are saying the case’s continuation advantages Seery and the property’s legal professionals slightly than collectors, which embrace Dondero.
Jernigan even talked about that the extended case was drawing consideration from different judges.
“One other decide in Texas…instructed me that Highland has spawned extra appeals on the Fifth Circuit than some other — I do not know if he stated chapter case in historical past or Chapter 11,” Jernigan stated.
In January, legal professionals for the Dondero events as soon as once more sought Jernigan’s removing from the case by means of a writ of mandamus, an order from the next courtroom that may require Jernigan to recuse herself on account of bias. However throughout a listening to on Jan. 24, she expelled events together with legal professionals, media and members of the general public from the courtroom in obvious defiance of latest coverage revisions by the Judicial Convention of america increasing public entry to chapter proceedings.
Final 12 months, there have been requires Jernigan’s recusal from the case on the grounds that she has a robust bias towards hedge fund managers, and Dondero specifically, based mostly on novels she wrote.
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Decide Avery Lassiter, the protagonist in Jernigan’s first self-published novel, He Watches All My Paths, and its sequel, Hedging Dying, makes “sturdy unfavourable feedback about hedge-fund operators in each books,” in accordance with an knowledgeable report from former federal appellate decide and regulation professor Steve Leben, and a “main villain” within the second guide bears a hanging resemblance to Dondero.
Attorneys for Dondero say Jernigan engaged in “unethical promotion” of her novels based mostly on Dondero whereas he nonetheless has proceedings earlier than her courtroom.
Twitter account @SJNovels, publish dated August 28, 2022
Jernigan promoted the novels on her social media and journey blogs – the place she recounts journeys to locations like Malta and Tanzania – and in business occasions with legal professionals that apply earlier than her, underscoring how they mirror actual life, writing: “I’m not going to disclose the identify of the lodge, since this web site shouldn’t be about promoting issues. Moderately, I’ll merely point out that the lodge is referred to by identify in Chapters 32 and 33 of my first novel, He Watches All My Paths. So if you happen to actually wish to know …. (oh wait, possibly that appears like promoting).”
The Dondero events’ legal professionals say the allegations of judicial bias, monetary mismanagement, SEC violations and authorized obstructions solid a shadow over the integrity of the authorized course of and the potential for a good decision to the case.
TMX contributed to this story.