Sign up for The Memo US newsletter for the latest distressed news and analysis, in your inbox every two weeks.

At a status and scheduling conference on various pending motions in PosiGen, including the debtors’ emergency motion seeking approval of a global settlement and DIP, Judge Christopher Lopez stated that “where this case is, it screams for mass mediation to… resolve the issues.”

Judge Lopez advised the parties that based on the time that would be required for parties to complete discovery, “[none of the motions] can be heard… any time in January, procedurally,” and indicated that he did not like “any of the options” that were before him. He therefore urged the parties “to get in a room and see if you can get something done in January.”

Judge Lopez stated that considering the inherent litigation risk and the appellate risk, regardless of how he rules on any of the motions, he thinks “this case comes to a screeching halt.” Referencing the pending trustee motions, he commented that even if the appointment of a Chapter 11 trustee is the appropriate relief under the Bankruptcy Code, that could lead to the case converting to Chapter 7 which he did not see as beneficial for unsecured creditors.

Addressing the debtors’ motion seeking interim and final approval of a global settlement and DIP, he stated that that motion “can’t be heard on an interim basis because there's way too many meaty decisions that need to be made, which would require… a definitive answer on cash, tracing of that cash, ownership of projects.”

He continued, “That's just going to, on its face, require a lot of discovery. And I can't deprive parties of the day in court… That’s gonna take a lot of time and a lot of money to get to a point where I can procedurally provide any answer to parties.”

“That's even assuming that I can even hear any of this with a pending adversary proceeding, which was just filed yesterday, which is overlapping with a lot of these issues right now,” he said, referencing the adversary proceeding filed against the debtors by List Government Receivables, asserting among other things claims of fraudulent inducement, breach of contract, and unjust enrichment.

Again, encouraging mediation, he stated, “I think you all need to figure out where you want to go in January and I think you need to spend a day or two thinking about that and spending time there — because these motions don't need to be set for hearing anytime soon. [The parties] need to figure out if there's even a path to even getting to these hearings. And I think there is… that doesn’t involve me making decisions… You all need to look at the really big picture… I think there's a path to resolving it, but it's going to require just good old-fashioned restructuring work.”

Stating that due process would require that he hear the motions “sometime in… February,” Judge Lopez remarked, “But I think in the interim, y’all can dual track this by getting in a room, or some portion of you getting in a room and figuring something out.”

He continued, “Go back to your clients, see what they they have to say. I’ll give you all a date. We can pick stuff up and we can tee stuff up between now and then.”

The Chapter 11 docket can be found on the 9fin platform.