Legacy settlement with Connaught submitted for court approval

By Jennifer Lanning Drey

Portland, Ore., Feb. 20 - The Chapter 11 trustee for Legacy Estate Group LLC parent Connaught Capital Partners LLC requested court approval of a global settlement agreement between Legacy, with its official committee of unsecured creditors, and Connaught, according to a Tuesday filing with the U.S. Bankruptcy Court for the Northern District of California.

The agreement would settle a dispute in which Legacy and its creditors committee contend that prior to Connaught's bankruptcy filing, current and former "insiders" and "affiliates" of the company received more than $13 million in improper distributions, to the detriment of Legacy.

In addition, Legacy has claimed that by breaching their fiduciary duties to Legacy, the insiders caused total damages to the company that may exceed $30 million.

The trustee has said in the past that a portion of the claims were not Connaught's responsibility.

Under the settlement agreement, Legacy would hold an $8.5 million allowed general unsecured claim against the Connaught estate. However, distributions made to Legacy would not exceed 50% of all amounts distributed to holders of allowed general, unsecured claims and any allowed junior claims or interests in the Connaught case.

The committee, on behalf of the Legacy estate, and the trustee, on behalf of the Connaught estate, would jointly control and prosecute claims made by Connaught or Legacy against insiders, including mismanagement claims.

Additionally, to the extent that distribution on account of Legacy's allowed general claim resulted in any distribution by Legacy to Connaught, Legacy would not be entitled to any further distribution from the Connaught estate.

All proceeds obtained through judgments or settlements related to estate joint claims would be evenly divided between the companies' estates, according to the filing.

A hearing has been scheduled for Feb. 23.

Legacy, a St. Helena, Calif., subsidiary of Connaught, filed for bankruptcy on Nov. 18, 2005. Legacy's Chapter 11 case number is 05-14659.

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