Bankruptcy judge approves LandAmerica plan

The end is near for LandAmerica Financial Group Inc.

U.S. Bankruptcy Judge Kevin R. Huennekens approved the Henrico County-based title insurer's plan yesterday to dissolve itself, pay creditors and set up trust committees to wind down the estate.

"Not everyone is happy but this is the happiest plan we could have," Huennekens said after a daylong hearing in U.S. Bankruptcy Court in Richmond.

An overwhelming majority of creditors, 97 percent, voted to approve the plan.

Unsecured creditors are estimated to receive between 2 cents and 81cents per dollar owed.

"It is a miracle that we're here and that a substantial amount of money should be flowing out in a relatively short amount of time," assistant U.S. Trustee Robert Van Arsdale said.

LandAmerica and subsidiary LandAmerica 1031 Exchange Services Inc. filed for bankruptcy protection last November.

In the ensuing year, the firm's primary title insurance businesses were sold off, nine other subsidiaries declared bankruptcy and more than 100 fraud complaints were filed against the exchange company in bankruptcy court. Those complaints led to several trials and more than 100,000 pages of documents.

"The confirmation of the plan is bringing to an end a year of very trying litigation and extreme administrative expense, and it's going to put the most possible money in the hands of the creditors," said DurretteBradshaw PLC attorney Ronald A. Page Jr., who represented several exchange customers who became creditors.

Once the plan takes effect next month, there will be no more LandAmerica employees. A hearing has been set for Dec. 17 to settle claim disputes.

Trusts will be set up to handle litigation and estate matters for each subsidiary. The job of the trust committees will be to liquidate remaining assets and pursue litigation, said Rachel Strickland, a New York attorney whose firm is representing LandAmerica.

The exchange company trust will go after investment houses that marketed auction-rate securities as liquid investments. The market for those investments became nonliquid in February 2008, which led to the exchange company's downfall because it had more than $200 million in customer funds parked there.

The confirmation of the plan came yesterday after Huennekens and attorneys worked through nearly 20 objections.

Chief among the objections were those filed by the office of the U.S. Trustee W. Clarkson McDow Jr., who is charged with upholding bankruptcy laws.

McDow objected to a provision that removed blame from key players in the case, including attorneys, other professionals and members of creditors committees. Creditors committee members are creditors who are unpaid and volunteer.

Attorneys for LandAmerica and the creditors committee requested an exculpation provision as a way to prevent lawsuits in a case that has been contentious.

The trustee did not like the inclusion of attorneys in the provision, saying "attorneys should not shield themselves from liability."

"The court is well aware of the volume of emotion in this case," said Dallas attorney Charles R. Gibbs, who represents the unsecured creditors committee for subsidiary LandAmerica 1031 Exchange Services Inc.

He said letters and calls to the court, the trustee, public officials and attorneys included many "unwarranted and baseless shots."

Huennekens agreed and overruled the trustee's objection saying, "If there ever was a cause for exculpation, this is the case."

Contact Emily C. Dooley at (804) 649-6016 or .