© 2013 The Texas Lawbook.
By Mark Curriden
Senior Writer for The Texas Lawbook
Creditors in the 2010 bankruptcy case of Dallas-based Idearc Inc. seeking to recoup more than $9 billion in losses were dealt a near certain death blow Tuesday when a federal judge in Dallas ruled they have almost no chance of winning their case.
US District Judge Joe Fish, in a 66-page written decision and in a subsequent three page show cause order, said that Idearc, a publisher of the US Yellow Pages for small and medium sized businesses, was valued at more than $12 billion when Verizon Communications spun off the Dallas business directory in 2006.
The judge’s $12 billion valuation of Idearc, which is now known as SuperMedia Inc., means that the company was solvent when it was spun off and that Verizon did not mislead investors or creditors, which is the basis of the lawsuit, according to legal experts.
Idearc’s value plummeted in the years following the 2006 spin off, leading to the company filing for Chapter 11 bankruptcy protection in 2010. As part of the resolution of the bankruptcy, the trustee, led by US Bank National, sued Verizon claiming the telecommunications giant defrauded shareholders.
Damages in the case were initially estimated to be as high as $14 billion, which would have made it one of the largest corporate legal disputes in the Texas courts since Pennzoil won a $10.5 billion breach of contract case against Texaco in 1985.
Judge Fish gave lawyers for the creditors until Feb. 8 to provide additional evidence or arguments or face having the entire lawsuit dismissed.
“It appears to the court that, with respect to all the legal claims that remain in this case, the plaintiff bears the burden of proving that Idearc was insolvent, that Idearc did not receive reasonably equivalent value in the spinoff for the debt and cash that it transferred to Verizon, or that Idearc did not have sufficient surplus at the time of the spinoff,” Judge Fish wrote in his order. “Because of the court’s valuation finding, it also appears that the plaintiff will be unable to meet this burden, so that all of the plaintiff’s remaining legal claims will fail.
“The court therefore orders the plaintiff to show cause why judgment should not be entered for the defendants on the plaintiff’s remaining legal claims,” the judge wrote.
Lawyers for neither side responded to requests for comment.
Court records show that Weil, Gotshal & Manges litigation partners Ray Guy of Dallas and John Strasburger of Houston and bankruptcy partner Alfredo Perez lead the legal team for Verizon, while Haynes and Boone partners Patrick Keating, Werner Powers and David Taubenfeld of Dallas represent US Bank National
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