Richmond, Virginia. On November 1, 2012, Gerald A. McHale, Jr., Liquidation Trustee for the LandAmerica 1031 Exchange Services, Inc. Liquidating Trust (“LES Trust”) filed his status report and the Motion of the LES Trustee for Order Approving Form of Questionnaire to Accompany Damages Claim Form and Granting Related Relief.
Prior E&O Settlement Update
As you will recall, in April, 2012, the Bankruptcy Court approved the settlement that the LES Trustee negotiated with Lloyd’s of London (“Underwriters”), the E&O insurer, for $37,855,029.06, of which the gross recovery to the LES Trust is $36,855,029.06 (the “E&O Settlement”). That E&O Settlement also involved an $11 million settlement between certain Title companies and a purported class of exchangers of LES, where class counsel has also agreed to cap its fee request at 25% of $9 million (“Class Title Company Agreement”).
Bankruptcy Court approval of the E&O Settlement is final, but will only be effective and the money will only be available for distribution when a separate federal court approves that Class Title Company Agreement, and such order is final.
On July 5, 2012, United States District Court in the Northern District of California preliminarily approved the Class Title Company Agreement. A final hearing regarding this settlement is set for November 2, 2012. This means that a distribution of the E&O insurance settlement funds cannot occur until the end of this year. The LES Trustee believes that this will yield a distribution of approximately 15.5% to eligible Exchangers.
Recovery in Full of Exchange Funds
Prior to the above described settlements, the LES Trustee had distributed approximately 79% to eligible Exchangers on their lost principal (having already paid segregated and note exchangers in full). Once final, the E&O Settlement will bring an additional distribution to eligible Exchangers of approximately 15.5%. The Hayes Class Action Settlement and the Class Title Company Agreement will bring an additional distribution to eligible Exchangers of approximately 5.5%. This will bring the recovery of exchange funds to 100%.
After the exchange claims are paid in full, the LES Trust will have approximately $15.5 million in cash available for damages claims. As such, the LES Trustee proposes the attached Damages Questionnaire Form and Cover Letter. Damages will only be available to the approximately 130 exchangers that filed proofs of claim indicating that they had incurred damages.
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