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J.C. Penney lawyers called in for a private meeting with a new judge

The court is concerned about the lack of progress in the case, just a few days after Penney struck a deal with its largest landlords, Simon and Brookfield.

J.C. Penney’s bankruptcy case is moving too slowly. That’s the reason given to the lawyers who were ordered by the court to appear in a private meeting late Monday, according to a new filing.

“The Court is concerned that progress in the case has slowed,” said the order demanding the appearance at 6 p.m. of key lawyers in the case: Joshua Sussberg of Kirkland & Ellis, the lead lawyer for Penney, and Andrew Leblanc of Milbank and Philip Dublin of Akin Gump Strauss Hauer & Feld, lawyers for the lenders.

There’s an unusual twist to this hearing.

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U.S. Bankruptcy Court Judge David Jones, who has presided over the case since Penney filed for Chapter 11 on May 15, won’t be leading the private meeting. He may not even find out what happens.

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U.S. Bankruptcy Judge Marvin Isgur will be conducting the hearing, and he will not report results of the meeting to Jones without the consent of the participating lawyers, according to the filing entered into the docket by Jones.

Penney was scheduled to have a hearing Monday morning on the auction of 142 store leases and a few of the stores it owns that have been on the market for several weeks. That hearing was postponed. Penney said Wednesday that it had a deal valued at $1.75 billion with Simon Property Group and Brookfield Property Group, which together are landlords to 160 Penney stores.

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Isgur recruited Jones to become a bankruptcy judge with him in Houston. The two have created a stronger court operation over the past decade that can handle the large, complex, high-dollar cases. For years, those big cases automatically went to New York and Delaware.

A recent article in The Texas Lawbook quoted several Texas lawyers who credited Isgur and Jones with reinvigorating the corporate restructuring law practices in Texas, resulting in millions of dollars of revenue. Recent bankruptcy filings, such as J.C. Penney, Neiman Marcus, Chesapeake Energy and California Pizza Kitchen, would have chosen other courts in the past.

It’s not the first time a closed-door hearing has been called for lack of progress. Jones called the lawyers in on Aug. 19 for a private meeting. Penney still has about 70,000 employees, and they’re often mentioned by Jones and Penney’s lead lawyer, Sussberg, during the hearings as a reason for working harder in the case.

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Twitter: @MariaHalkias

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