Toys R Us is long gone, but its former private equity owners still can't shake it.

Driving the news: A U.S. bankruptcy court judge has ruled that a creditor lawsuit can proceed against a group of the bankrupt retailer's former top executives and directors, including partners of Bain Capital and KKR.

Flashback: Toys R Us went under in 2017, causing around 3,000 employees to lose their jobs.

The case: Creditors allege that the company spent around $600 million on goods and services between filing for Chapter 11 bankruptcy and liquidating its stores, without adequately disclosing to vendors that the company's finances were dire enough that shutdowns were likely.

What to know: Private equity representatives on company boards are generally covered by directors and officers (D&O) liability insurance, although such policies typically include deliberate fraud exemptions.

The bottom line: Were the creditors to prevail, no matter the particular insurance coverage, it could shake the private equity model. They basically are arguing for a de facto clawback from the company’s private equity owners, much like a PE fund could owe its limited partners were an investment to lose money, based on pre-insolvency fees.