The bankruptcy judge overseeing Federated proceedings removed himself from the case, saying he feels compromised by the ad.
The ad, from two aviation trade groups, ran in Forbes last month and was titled "No plane/No gain." It and a related brochure, touted the cost-effectiveness of corporate jets. The ad referred to Federated, its Burdines unit and their proceedings in U.S. Bankruptcy Court, saying the court told the retailer to dispose of corporate aircraft, then reversed its position.
In response to a court inquiry, Federated Chairman Allen Questrom said the story in the ad was false. An attorney for Judge J. Vincent Aug Jr. also contacted the trade groups. They immediately suspended the campaign.
In a sharply worded order removing himself, Judge Aug said the ad ridiculed the court and falsely portrayed him as endorsing corporate aircraft.
"The elements of libel and false advertising being present ... there is now the appearance of a conflict between the court and" Federated, Judge Aug wrote.
Information for the ad came from Burdines employees, including at least one corporate pilot, said Jack Olcott, president, National Business Aircraft Association, which created the ad in-house. Federated employees also reviewed pre-publication copy.
"It was not our intent in any way to embarrass the bankruptcy court or judge," said Ed Stimpson, president of the General Aviation Manufacturers Association, the ad's other sponsor.
"Our attorney says that he doesn't anticipate any" litigation against the group, Mr. Olcott said. "I don't think there's a case on record where a federal judge has sued anyone for libel. We're babes in the woods in this."
Federated emerged from Chapter 11 in 1992, but some related litigation is still pending.