Andrew D. Krause

A New York federal judge has reversed the confirmation of Brazilian airline Gol Linhas Aereas Inteligentes' Chapter 11 plan, ruling that the bankruptcy court improperly found creditor silence on the proposal's third-party claims releases could be assumed as consent. In an opinion issued Monday, U.S. District Judge Denise L. Cote granted an appeal by the U.S. Trustee's Office, struck the releases in the plan and remanded it to bankruptcy court. The judge determined that under the general principles of contract law, the provisions at issue were not consensual. Gol Linhas filed for Chapter 11 protection in January 2024 and unveiled its plan in December last year, saying it had reached an agreement with creditors, major investor Abra Group and other stakeholders to wipe out $2.5 billion in debt and emerge with $1.9 billion of exit financing. U.S. Bankruptcy Judge Martin Glenn confirmed the plan in May 2025 over the objections of the U.S. Trustee's Office. It argued the proposal improperly called for releasing creditor claims against third-party nondebtors unless creditors acted to opt out of the releases, and that this rendered the plan's releases nonconsensual under New York contract law and a violation of the U.S. Supreme Court's 2024 decision on Purdue Pharma's Chapter 11 plan. In its appeal, the airline argued federal contract law applied. However, in his opinion, Judge Cote said the choice of law is irrelevant because the same basic principles of contract law apply either way. "And, as already explained, the general principles of contract law, as embodied in the restatement of contracts, establish that, outside of rare exceptions, consent cannot be implied from silence," she wrote. The district court rejected the company's contentions that opt-out releases are allowed in class action settlements, saying the creditors in the case are not a class and the procedures for a class action weren't used. Judge Cote also rejected the argument that creditors had accepted the jurisdiction of the bankruptcy court — and, by extension, any releases ordered by the court — concluding that the airline had cited no cases to back its "logical leap." Representatives of the U.S. Trustee's Office declined comment Tuesday. Counsel for Gol did not immediately respond to a request for comment late Tuesday. The U.S. Trustee's Office is represented by Linda A. Riffkin, Annie Wells, Rachael E. Siegel and Andrew D. Velez-Rivera. Gol Linhas is represented by Evan R. Fleck, Lauren C. Doyle, Bryan V. Uelk, Andrew M. Leblanc and Erin E. Dexter of Milbank LLP. The appeal is In re: Gol Linhas Aereas Inteligentes SA et al., case number 1:25-cv-04610, in the U.S. District Court for the Southern District of New York. The bankruptcy is In re: Gol Linhas Aereas Inteligentes SA et al., case number 1:24-bk-10118, in the U.S. Bankruptcy Court for the Southern District of New York.

Dec 2

2 min

A Michigan federal judge Wednesday selected a group of pension funds to serve as a lead plaintiff for Neogen investors alleging the company hid postmerger financial difficulties following a combination with a division of manufacturing giant 3M. U.S. District Judge Hala Y. Jarbou said in an order the seven pension funds appointed as lead plaintiff collectively have a larger financial stake in the litigation than the other lead plaintiff candidate, the IAM National Pension Fund. She also named Saxena White PA and Grant & Eisenhofer PA lead counsel for the plaintiffs at the pension funds' request. Together, the seven funds — Operating Engineers Construction Industry and Miscellaneous Pension Fund, City of Miami Fire Fighters' & Police Officers' Retirement Trust, Metropolitan Employee Benefit System, City of Orlando Firefighters' Pension Fund, City of Orlando Police Officers' Pension Fund, City of Orlando General Employees' Pension Fund and West Palm Beach Firefighters' Pension Fund — have asserted $3.7 million in losses, surpassing IAM's $1.7 million loss claim, according to the decision. IAM, which had also sought to be appointed lead plaintiff, said it experienced the largest individual investor loss and argued the seven funds could not aggregate their losses to win lead plaintiff status. The judge that found nothing in the Private Securities Litigation Reform Act prevents a group of plaintiffs from combining their losses for the purposes of calculating which party has the greatest financial interest. Courts in the Sixth Circuit generally take a "case-by-case" approach to determine if the members of a proposed group of plaintiffs can effectively work together to lead the proposed class, she said. In this case, the seven pension funds provided "a joint declaration stating that they 'are dedicated to maximizing the class's recovery by ensuring this litigation is prosecuted in an efficient and cost-conscious manner and believe that [they] have put in place mechanisms to ensure effective decision-making and coordination and oversight of [their] chosen counsel,'" according to the order. Judge Jarbou said she was "satisfied" with the pension funds' declaration of "their intent and ability to work together and represent the interests of the class." IAM, represented by Robbins Geller Rudman & Dowd LLP, had additionally contended that seven funds made up too large a group to serve as a lead plaintiff, citing a "general rule" that a lead plaintiff group should have no more than five members. The pension fund group had countered that the three Orlando, Florida, funds could be considered one entity, as they have the same executive director, are part of a unified investment strategy for the city's public investments and purchased the Neogen stock in a jointly held account. The court determined it ultimately did not matter if the Orlando pension funds were one entity or separate entities because the "no more than five" rule is only a guideline, and the judge was satisfied that the close ties between the Orlando funds meant the group would not be unwieldy. "Thus, the pension funds may amalgamate their losses, and they collectively have the largest financial interest of any potential lead plaintiff," Judge Jarbou wrote. The institutional investors sued Neogen and two of its executives in July, alleging the company hid financial difficulties it faced after merging with the food safety division of 3M Co. in 2022. Neogen led investors to believe the integration was progressing more smoothly than it was and that any hurdles were being resolved, according to the suit. Then, in January 2025, the company revealed, among other things, that its net income for the most recent financial quarter was negative because of a $461 million write-down related to the business combination. It also revealed it had identified weaknesses affecting internal financial controls, and lowered the firm's revenue projections for the coming fiscal year. From an August 2023 high of nearly $24 per share, Neogen's stock price dropped to just shy of $5 a share at the beginning of June 2025, a 79% drop that erased more than $4 billion of the company's market capitalization over the class period, the investors said. Representatives of the parties did not immediately respond to requests for comment. The lead plaintiffs are represented by Marco A. Dueñas, Maya Saxena and Lester R. Hooker of Saxena White PA, Karin E. Fisch and Vincent J. Pontrello of Grant & Eisenhofer PA, Robert D. Klausner of Klausner Kaufman Jensen & Levinson, and E. Powell Miller, Marc L. Newman and Dennis A. Lienhardt Jr. of The Miller Law Firm PC. IAM is represented by Jason A. Forge, Danielle S. Myers, Michael Albert and Kenneth P. Dolitsky of Robbins Geller Rudman & Dowd LLP. Neogen is represented by John A. Neuwirth, Stefania Di Trolio Venezia and Tanner S. Stanley of Weil Gotshal & Manges LLP and D. Andrew Portinga of Miller Johnson Snell & Cummiskey PLC. The case is Operating Engineers Construction Industry and Miscellaneous Pension Fund v. Neogen Corp. et al., case number 1:25-cv-00802, in the U.S. District Court for the Western District of Michigan.

Dec 3

4 min

A Michigan federal judge Wednesday selected a group of pension funds to serve as a lead plaintiff for Neogen investors alleging the company hid postmerger financial difficulties following a combination with a division of manufacturing giant 3M. U.S. District Judge Hala Y. Jarbou said in an order the seven pension funds appointed as lead plaintiff collectively have a larger financial stake in the litigation than the other lead plaintiff candidate, the IAM National Pension Fund. She also named Saxena White PA and Grant & Eisenhofer PA lead counsel for the plaintiffs at the pension funds' request. Together, the seven funds — Operating Engineers Construction Industry and Miscellaneous Pension Fund, City of Miami Fire Fighters' & Police Officers' Retirement Trust, Metropolitan Employee Benefit System, City of Orlando Firefighters' Pension Fund, City of Orlando Police Officers' Pension Fund, City of Orlando General Employees' Pension Fund and West Palm Beach Firefighters' Pension Fund — have asserted $3.7 million in losses, surpassing IAM's $1.7 million loss claim, according to the decision. IAM, which had also sought to be appointed lead plaintiff, said it experienced the largest individual investor loss and argued the seven funds could not aggregate their losses to win lead plaintiff status. The judge that found nothing in the Private Securities Litigation Reform Act prevents a group of plaintiffs from combining their losses for the purposes of calculating which party has the greatest financial interest. Courts in the Sixth Circuit generally take a "case-by-case" approach to determine if the members of a proposed group of plaintiffs can effectively work together to lead the proposed class, she said. In this case, the seven pension funds provided "a joint declaration stating that they 'are dedicated to maximizing the class's recovery by ensuring this litigation is prosecuted in an efficient and cost-conscious manner and believe that [they] have put in place mechanisms to ensure effective decision-making and coordination and oversight of [their] chosen counsel,'" according to the order. Judge Jarbou said she was "satisfied" with the pension funds' declaration of "their intent and ability to work together and represent the interests of the class." IAM, represented by Robbins Geller Rudman & Dowd LLP, had additionally contended that seven funds made up too large a group to serve as a lead plaintiff, citing a "general rule" that a lead plaintiff group should have no more than five members. The pension fund group had countered that the three Orlando, Florida, funds could be considered one entity, as they have the same executive director, are part of a unified investment strategy for the city's public investments and purchased the Neogen stock in a jointly held account. The court determined it ultimately did not matter if the Orlando pension funds were one entity or separate entities because the "no more than five" rule is only a guideline, and the judge was satisfied that the close ties between the Orlando funds meant the group would not be unwieldy. "Thus, the pension funds may amalgamate their losses, and they collectively have the largest financial interest of any potential lead plaintiff," Judge Jarbou wrote. The institutional investors sued Neogen and two of its executives in July, alleging the company hid financial difficulties it faced after merging with the food safety division of 3M Co. in 2022. Neogen led investors to believe the integration was progressing more smoothly than it was and that any hurdles were being resolved, according to the suit. Then, in January 2025, the company revealed, among other things, that its net income for the most recent financial quarter was negative because of a $461 million write-down related to the business combination. It also revealed it had identified weaknesses affecting internal financial controls, and lowered the firm's revenue projections for the coming fiscal year. From an August 2023 high of nearly $24 per share, Neogen's stock price dropped to just shy of $5 a share at the beginning of June 2025, a 79% drop that erased more than $4 billion of the company's market capitalization over the class period, the investors said. Representatives of the parties did not immediately respond to requests for comment. The lead plaintiffs are represented by Marco A. Dueñas, Maya Saxena and Lester R. Hooker of Saxena White PA, Karin E. Fisch and Vincent J. Pontrello of Grant & Eisenhofer PA, Robert D. Klausner of Klausner Kaufman Jensen & Levinson, and E. Powell Miller, Marc L. Newman and Dennis A. Lienhardt Jr. of The Miller Law Firm PC. IAM is represented by Jason A. Forge, Danielle S. Myers, Michael Albert and Kenneth P. Dolitsky of Robbins Geller Rudman & Dowd LLP. Neogen is represented by John A. Neuwirth, Stefania Di Trolio Venezia and Tanner S. Stanley of Weil Gotshal & Manges LLP and D. Andrew Portinga of Miller Johnson Snell & Cummiskey PLC. The case is Operating Engineers Construction Industry and Miscellaneous Pension Fund v. Neogen Corp. et al., case number 1:25-cv-00802, in the U.S. District Court for the Western District of Michigan.

Dec 3

4 min

Three fiduciaries of a now-shuttered Pacific states restaurant chain and its affiliates must face a claim in Delaware that they breached or aided breaches of fiduciary duties to the venture's Oregon-based affiliate, brought by an investor that pumped $18 million into the business, a vice chancellor ruled on Wednesday. Vice Chancellor Bonnie W. David retained one of four counts in the Delaware Court of Chancery complaint brought by investor MGG SPV Duck LP in February. The suit alleged management failures and conflicted moves that directed the $18 million — described as originally intended only for Oregon operations of Shari's Restaurant — to Washington state and California affiliates and activities instead. Vice Chancellor David found that, after the suit was filed in early 2023, MGG "gained access" to financial documents of the restaurant's parent company Gather Holdings Group LLC showing that those named "had been drawing on [a] commingled account to pay expenses of the non-Oregon business. The debits were allegedly partially recorded as credits on the Oregon balance sheets, but without any actual transfer of cash to balance" the account. "It is reasonably conceivable that the subsidiary's officers breached their duty of loyalty by causing the corporation to 'loan' funds to GHG's other business lines, without security or any expectation that such funds could ever be repaid, in order to further the personal interests of GHG's chief executive officer — who personally guaranteed loans to those other businesses that otherwise would have gone unpaid," the vice chancellor said. MGG intended the $18 million for Oregon operations of GHG's Shari's Restaurant Group Inc. and Shari's Management Corp., the complaint said. The funds were invested through preferred stock in one of GHG's Oregon-side subsidiaries and loaned to another of the company's indirect affiliates. Behind the investor's preference for Oregon operations, the vice chancellor wrote, were "attractive" features that included a "potentially lucrative state-licensed video lottery gaming" operation there. At the center of the complaint was Samuel Borgese, a South Carolina resident and holder of nearly all interests in GHG and the former CEO of Shari's Restaurant Group and Management Corp., along with those two companies' Chief Financial Officer Daniel Smith, and Leslie Crook, the president of Shari's Management Corp. An amended version of the complaint that produced the decision Wednesday alleged that Borgese "limit[ed] expenditures of capital on vitally needed maintenance" at the Restaurant Group and Management Corp. affiliates so that he could instead use those funds to pay expenses for the non-Oregon business, including "a term loan and receivables financing [that] Borgese made and personally guaranteed." The lone surviving count alleged that Borgese breached his fiduciary duties as an officer and "de facto manager" of the two affiliates, as did Crook, accused of breaching duties as an officer of Shari's Management Corp. Allegations in the complaint, the vice chancellor found, support a reasonably conceivable inference that Borgese committed self-dealing by transferring funds out of the corporation to avoid personal liability, and that Crook and Smith acted at his behest, supporting a claim for breach of the duty of loyalty. Two of the dismissed counts were blocked by provisions in a GHG agreement limiting the personal liability of those named, while the third count that was tossed alleged breaches of the implied covenant of good faith and fair dealing, MGG is represented by John L. William and Brian C. Crawford of The Williams Law Firm PA, and Nicholas J. Rosenberg and Joshua Gardner of Gardner & Rosenberg PC. Borgese, Smith, Crook and GHG are represented by Andrew D. Kinsey and Matthew Fox of Benesch Friedlander Coplan & Aronoff LLP. The case is MGG SPV Duck LP, directly and derivatively, on behalf of Shari's Restaurant Group Inc. and Shari's Management Corporation v. Samuel Borgese et al., case number 2025-0196, in the Court of Chancery of the State of Delaware.

Nov 20

3 min

A captive insurance company that was later dissolved challenged $800,000 in taxes and penalties in the U.S. Tax Court, saying the Internal Revenue Service wrongly claimed the company had $3 million in unreported long-term capital gains. In a petition Wednesday, Hanover Insurance Co. Ltd. argued that the IRS made a number of errors in calculating its tax liability for 2021, including that it had long-term capital gains that were more than the assets it reported holding for the tax year. The agency also claimed the company owned an interest in another company valued at more than $2 million, with a basis of zero, but didn't identify the company, Hanover said. The IRS further alleged, also incorrectly, that Hanover's unpaid taxes were due to a substantial valuation overstatement, according to the company. Hanover was formed under the laws of St. Kitts and Nevis in 2008 and licensed as a captive insurance company for small groups, according to the petition. For the next 10 years, it sold property and casualty insurance policies to companies owned by its shareholders. It also created multiple wholly owned subsidiary investment companies, each of which was affiliated with a Hanover shareholder, it said. Under the arrangement, the shareholder could "invest any surplus attributable to the insurance premiums that his or her operating company paid to Hanover," the company said. When the policy period expired, Hanover "would make capital contributions based on the surplus insurance premiums to each of the subsidiary investment companies," the company said. The subsidiaries then used those surplus payments to buy assets, according to the petition. Hanover's five shareholders liquidated the company in 2021 and all the leftover assets were transferred to the shareholders. Hanover said it reported those investments were worth more than $1 million. The company did not have any unreported capital gains that year, it claimed, and doesn't owe any taxes. Additionally, the company said it shouldn't be responsible for the $133,000 in penalties because it took tax positions that were backed by good evidence. Hanover "acted in good faith and with reasonable cause," it said, including relying on tax professionals. An attorney for Hanover declined to comment. The IRS declined to comment. Hanover is represented by Patrick J. McCann Jr. and Andrew D. Mullendore of Chamberlain Hrdlicka White Williams & Aughtry. Counsel information for the IRS was unavailable. The case is Hanover Insurance Co. Ltd. v. Commissioner, docket number 15459-25, in the U.S. Tax Court.

Nov 14

2 min