Barnett Capital Advisors Seeks to Intervene in J.C. Penney Bankruptcy Case, Demands More Than $1 Billion in Damages From Law Firm Jackson Walker LLP

HOUSTON, Feb. 24, 2025 /PRNewswire/ -- Barnett Capital Advisors, a first and second lien creditor in the J.C. Penney (JCP) Chapter 11, today announced that it has joined the Motion to Intervene filed by another creditor, Eric Moore, in the United States Bankruptcy Court for the Southern District of Texas. The motion alleges a pattern of misconduct and fiduciary breaches enabled by the secret relationship between Judge Jones and Jackson Walker Attorney Elizabeth Freeman. The motion alleges that billions in cash and real estate were funneled to select creditors while others—including creditors in the same class—were left with nothing as the result of an illegal Uptier transaction. This transaction mirrors one recently overturned in the Fifth Circuit's Serta decision. The legal action seeks more than $1 billion in damages from Jackson Walker LLP for its alleged role in the purported scheme.

Moore's motion, now backed by Barnett Capital Advisors and other creditors, calls on the Court to allow these parties to participate in the adversary proceeding against Jackson Walker LLP. Central to the motion are concerns of judicial impropriety and hidden relationships, following revelations that Jackson Walker Partner Elizabeth Freeman reportedly maintained an undisclosed relationship with presiding Judge David Jones during the JCP bankruptcy proceedings.

"What occurred in this Chapter 11 is not normal. The Court must take a hard look at the full scope of harm done to creditors and investors," said Andrew Carrillo, President of Barnet Capital Advisors.

The motion lists several key allegations against Jackson Walker, including that it:

1. Allowed the Uptier Group, who were owed only $900 million, to receive more than $3 billion in concealed payments without disclosing this overpayment to the U.S. Trustee and affected creditors.
   
   
2. Never provided a liquidation analysis as required under 11 U.S.C. § 1129(a)(7).  This allowed Jackson Walker to conceal billions of dollars in assets and wipe out first and second lien secured bond holders.
   
   
3. Paid $23 million to the debtors' investment banker, Lazard, despite Lazard's failure to perform the most basic services appropriate to its role in the proceedings—most notably its failure to produce any valuation of the debtors' assets—and its preemptive claim that it couldn't secure a better sale price than the one the debtors had already agreed to.
   
   
4. Misrepresented the sale process by reporting that an auction of J.C. Penney's assets had occurred, when in fact it was a private sale (See Dkt. 1814, "Private Sale is appropriate").
   
   
5. Signed off on a status update (filed on November 1, 2023) alleging that only $1 billion was available for distribution to creditors, when more than $8 billion was ultimately distributed.
   
   
6. Argued that the debtors' assets were "worth nowhere close to $8.4 billion," on August 19, 2020, only 180 days before the alleged purchasers documented that they had received over $8.4 billion in assets from the debtors.
   
   
7. Refused to disclose to creditors, or file with the bankruptcy court, the distribution amount received by the DIP Lenders.
   
   
8. Maneuvered behind the scenes to select Judge Jones to preside over the J.C. Penney bankruptcy, because the other eligible judge was deemed a "process hawk."
   
   
9. Counseled the debtors to enter into a settlement agreement that violates the Supreme Court's decisions in AWECO and Jevic.
   
   
10. Allowed an undisclosed Uptier transaction that secretly distributed billions in assets to certain first lien bondholders and certain unsecured creditors, while skipping over creditors in higher in priority in violation of both the Fifth Circuit's Serta Simmons decision, 11 U.S.C. § 1123(a)(4) and the Absolute Priority Rule 1129(b)(2).

"The only reason you don't conduct a liquidation analysis is to hide assets," said Carrillo. "If you're hiding assets, you're doing it to harm the people to whom you owe a fiduciary obligation. That must be reviewed in detail in this case."

Raul Ferrer, a bond investor and JCP secured creditor: "Not only was there no liquidation analysis in the disclosure statement, but there was also no list of assets or their values. This omission concealed billions of dollars in assets from entire classes of bond investors who held valid liens on them. It's unconscionable and represents a fundamental breach of our rights as secured creditors. This makes me not trust the bond market. I don't want to ever buy secured bonds again."

The JCP Plan administrator's lawsuit against Jackson Walker currently seeks just $1 million for breach of fiduciary duty—an amount that Barnett Capital Advisors and other intervenors argue is a mere fraction of the actual damages.

The Motion to Intervene is Dkt. 4 in the adversary proceeding (Adv. Pro. No. 25-02002) under Case No. 20-20184 (CML) in the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division.

About Barnett Capital Advisors

Barnett Capital Advisors is a Wealth Management and Retirement Planning Firm committed to empowering retirees worldwide to achieve the retirement of their dreams. Offering personalized, unbiased advice, strategic financial planning, and intelligent investment strategies, the firm helps clients secure their financial future with confidence. For more information, visit www.barnettcapitaladvisors.com.

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SOURCE Barnett Capital Advisors