CHICAGO - An auction to sell off bankrupt Johnson Publishing's most valuable remaining asset - its historic Ebony photo archives - is set for Wednesday, seemingly the final poignant chapter for the Chicago-based publisher after 70 years in the magazine business.
But at least one unwanted legacy remains: a $5 million defamation lawsuit alleging Ebony falsely implicated two white Georgia high school students in the death of a black classmate.
A Chicago bankruptcy judge ruled this week that former Georgia FBI agent Richard Bell and his wife, Karen, can "proceed to final judgment" in the lawsuit against Johnson Publishing for articles indirectly linking their sons to the death of Kendrick Johnson, who was found lifeless inside a rolled-up gym mat at his high school in January 2013.
State medical examiners concluded that the death of Johnson, a 17-year-old student at Lowndes High School in Valdosta, Ga., was accidental asphyxiation after he became trapped while trying to retrieve a shoe that fell into the large mat.
Ebony ran a series of articles suggesting Johnson's death was no accident, and pointing a finger - using pseudonyms - at the Bell brothers, according to the defamation lawsuit, which was filed five years ago in Georgia federal court.
The lawsuit was automatically halted when Johnson Publishing filed for Chapter 7 bankruptcy protection in April. While it has yet to go to trial, the Bells are still hoping to recover any potential judgments in their favor from the publisher's liability insurers.
"Obviously, we think there's sufficient coverage to justify proceeding on the claim," Patrick T. O'Connor, a Savannah, Ga.-based attorney representing the Bells, said Wednesday.
Florida-based law firm Carlton Fields, which is representing Johnson Publishing in the defamation lawsuit, said in an emailed statement Friday that "it was not authorized to comment on this matter."
The amended bankruptcy order authorizes Chubb subsidiary Federal Insurance Company to advance defense costs to Carlton Fields. Chubb spokesman Jeffrey Zack said Friday the insurance company doesn't comment on pending litigation.
The racially charged case - Johnson was African American and the Bells are white - gained national media attention after Ebony published 10 stories by author Frederic A. Rosen between August 2013 and April 2014, which developed the theory that Johnson was murdered by blunt force trauma and placed inside the mat. The series referred to brothers "Chris and Clark Martin," the fictitious names of fellow students whose father was identified as an FBI agent, as possible suspects.
The Bells' lawsuit claimed that many students, teachers and coaches were aware that Chris and Clark Martin were pseudonyms for their sons, Branden and Brian Bell.
In 2016, a Justice Department investigation found insufficient evidence to support federal criminal charges in Johnson's death.
While author Rosen was dropped as a defendant in the defamation lawsuit as a "tactical decision," according to O'Connor, bankrupt Johnson Publishing remains both liable and viable to pursue, despite selling Ebony and Jet magazines to a Texas private equity firm in 2016, and preparing to sell off its most valuable remaining asset - the photo archives - as part of a court-approved liquidation.
The Ebony photo archives chronicle 70 years of the African American experience, spanning everyone from Martin Luther King Jr. to Sammy Davis Jr. The collection of more than 4 million original images includes a 1969 Pulitzer Prize-winning photo of King's widow and child, taken at his funeral, as well as iconic photos of Hank Aaron, Muhammad Ali, Malcolm X and Nelson Mandela, among many other notable African American figures.
The photo archives were appraised at $46 million in 2015, but expectations for the auction, which is being conducted by Hilco Streambank on behalf of the Johnson Publishing bankruptcy trustee, are more modest.
Qualified bids of at least $12.5 million are due Monday, with the auction set to begin Wednesday at 10 a.m. in the Chicago law office of Fox Swibel.
The bankruptcy auction is seeking to recover at least $13.6 million owed to secured creditors George Lucas and Mellody Hobson, whose company, Capital V Holdings, issued a $12 million loan to a struggling Johnson Publishing in 2015.
The filmmaker and his financier wife are free to bid on the archives using the $13.6 million owed as credit, but would receive the full collection in a foreclosure if no other bidder steps up.
While the Bells' case is not directly tied to the auction, their names are among a long list of unsecured creditors hoping to recover money from Johnson Publishing. Other assets that could be sold to pay off creditors include a private art collection owned by the publisher and the intellectual property associated with its Fashion Fair Cosmetics line.
If the Bells prevail in their defamation lawsuit, they aren't counting on receiving any proceeds from the liquidation of Johnson Publishing's assets, O'Connor said.
"If we were to obtain a judgment that exceeds the amount of insurance, then we would be limited to recovering the amount of insurance," O'Connor said.
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