Commentary: The Purdue Papers: The Petitioner’s Perspective on Why Third-Party Releases Are Not Permitted*​​​

by David R. Kuney
Georgetown University Law Center (Washington, D.C.)

On Sept. 20, 2023, the U.S. Solicitor General, counsel for the petitioner, filed its opening brief in the U.S. Supreme Court in William K. Harrington, U.S. Trustee, Region 2 v. Purdue Pharma L.P., et al. The brief addresses what District Court Judge McMahon called the “the great unsettled question” of bankruptcy law today: whether a bankruptcy court can approve nonconsensual third-party releases. The other appellants filed their briefs the same day. The respondents’ briefs are due shortly. On Oct. 11, 2023, the U.S. Supreme Court announced that oral argument in Purdue will be heard on Dec. 4, 2023. Purdue should not be misunderstood as just another statutory bankruptcy case for the Court. It may well be one of the defining moments of bankruptcy law, as it is likely to alter the course of bankruptcy law and practice for many years. Click here to read the full commentary.

Next Wednesday: Don't Miss Ken Feinberg Joining a Live Recording of ABI's "Party in Interest" Podcast Followed by a Virtual Networking Happy Hour!

ABI is honored to have Kenneth R. Feinberg, one of the nation’s leading experts in alternative dispute resolution, as a special guest for a live recording of ABI's "Party in Interest" podcast on Wednesday, October 25, at 4 p.m. EDT. Currently the court-appointed mediator in both the Imerys/Cyprus talc bankruptcy in Delaware, and the Honx asbestos bankruptcy in Texas, Feinberg's distinguished career includes previously having served as Special Master of the 9/11 Victim Compensation Fund, the Department of Justice Victims of State-Sponsored Terrorism Fund, the Department of Justice Boeing 737 Max Crash Victim Beneficiaries Compensation Fund and many other high-profile complex disputes over the past 40 years. Feinberg will be interviewed by ABI Executive Director Amy Quackenboss prior to a virtual happy hour networking session with your friends and colleagues. Click here to register!

Commercial-Property Distress in the U.S. Rises to a 10-Year High​​​

The value of distressed US commercial real estate neared $80 billion in the third quarter, its highest level in a decade, as rising interest rates and sagging office demand shook the property market, Bloomberg News reported. The value of buildings in bankruptcy, repossessed by lenders or in the process of liquidation increased by a net $5.6 billion in the quarter, MSCI Real Assets reported. Office properties accounted for 41% of the $79.7 billion total. The office sector, battered by remote work and declining tenant demand for space, “continued to be the driving force behind growing distress, providing 93% of the additional balance for the quarter,” MCSI said in the report. While the level of distress is still less than half of that reached in the depths of the global financial crisis, MSCI identified $215.7 billion of properties that are potentially troubled, with issues such as delinquent payments or slow lease-ups. Apartment buildings accounted for almost a third of those at-risk properties — “likely a function of the greater number of multifamily assets” rather than a crumbling of the sector, MSCI said. U.S. commercial-property values fell 9% in the year through September, and total transactions plunged 53%, MSCI reported separately. Read more.

Commercial real estate distress will be the focus at one of the key sessions at ABI's Winter Leadership Conference set for Nov. 30-Dec. 2 in Scottsdale, Ariz. Are you registered?

U.S. Halts Collection on Some Past-Due COVID Loans, Sparking Federal Probes​​​

The U.S. government has halted some efforts to collect an estimated $62 billion in past-due pandemic loans made to small businesses, concluding that aggressive attempts to recover the money — a portion of which may have been lost to fraud — could cost more than simply writing off the debt, the Washington Post reported. The Small Business Administration, which manages the program, adopted the policy in April, prompting the agency’s watchdogs to compute the potential losses in a September report that found the practice “risks” violating federal law. The internal directive since then has sparked an outcry on Capitol Hill, where House Republicans on Wednesday opened an investigation and joined their Senate GOP counterparts in demanding documents from the SBA. At the height of the coronavirus pandemic, Congress created the COVID-19 Economic Injury Disaster Loan program, known as EIDL, which provided low-interest loans to cash-starved companies. From 2020 until it stopped accepting new applications in May 2022, the initiative disbursed roughly $380 billion to help firms stay afloat and maintain their payrolls amid the worst economic crisis since the Great Depression. Unlike other pandemic-era programs, Congress required EIDL borrowers to pay back their loans, and some quickly appeared to fall behind: By March, the inspector general for the SBA projected that a subset of loans totaling about $62 billion were up to 30 days past due, or delinquent for longer, and that the number would probably grow. Anticipating a wave of defaults, however, the SBA had already decided that it would not take the most aggressive actions possible to pursue borrowers who received loans worth $100,000 or less. The agency said it planned to send out stern letters demanding payments and threatening penalties, and it aimed to prohibit these borrowers from obtaining federal aid again. But the SBA opted against referring all unpaid and delinquent loans to the Treasury Department, which can garnish wages and initiate other collection activities, according to reports, letters and other materials prepared by SBA and its top watchdog that were later reviewed by the Washington Post. Explaining the decision, SBA leaders said that the government at the time would be unlikely to recover most of the money anyway. They indicated they had few options because of decisions made under the Trump administration that limited debt collection, making the work to claw back money so costly that it would negate any potential federal savings. Read more.

American Household Wealth Jumped in the Pandemic​​​

American families saw the largest jump in their wealth on record between 2019 and 2022, according to Federal Reserve data released on Wednesday, as rising stock indexes, climbing home prices and repeated rounds of government stimulus left people’s finances healthier, the New York Times reported. Median net worth climbed 37 percent over those three years after adjusting for inflation, the Fed’s Survey of Consumer Finances showed — the biggest jump in records stretching back to 1989. At the same time, median family income increased 3 percent between 2018 and 2021 after subtracting out price increases. While income gains were most pronounced for the affluent, the data showed clearly that Americans made nearly across-the-board financial progress in the three years that include the pandemic. Savings rose. Credit card balances fell. Retirement accounts swelled. Other data, from both government and private-sector sources, hinted at those gains. But the Fed report, which is released every three years, is considered the gold standard in data about the financial circumstances of households. It offers the most comprehensive snapshot of everything from savings to stock ownership across racial, wealth and age groups. Read more.

Weekly U.S. Jobless Claims Drop to Nine-Month Low​​​

The number of Americans filing new claims for unemployment benefits fell to a nine-month low last week, suggesting that strong job growth persisted in October as the labor market remains tight, Reuters reported. The unexpected decline in initial jobless claims reported by the Labor Department on Thursday added to solid retail sales and factory production in September to suggest sustained momentum in the economy. Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 198,000 for the week ended Oct. 14, the lowest level since January. Unadjusted claims declined 18,561 to 181,181 last week. There were large decreases in Texas, New York, New Jersey, Georgia and California, which more than offset a notable rise in Tennessee. Read more.

Crypto Comes under New Scrutiny in Congress Following Hamas Attacks​​​

Congress is ramping up its scrutiny of the crypto world after reports that Hamas received funding from digital currencies, YahooFinance.com reported. Sens. Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.) and Rep. Sean Casten (D-Ill.) applied some new pressure on Tuesday with a letter to the White House and Treasury asking for a "plan" to "prevent the use of crypto for the financing of terrorism." The letter was a response to reports that militants behind the attack on Israel received large amounts of crypto as financing. "We urge you to swiftly and categorically act to meaningfully curtail illicit crypto activity and protect our national security and that of our allies," the lawmakers wrote in their letter, which included the names of 86 other bipartisan signers. The fear that crypto could be used to fund terrorist operations was already on the radar of many officials in Washington, D.C. The Treasury Department, Department of Justice, Federal Bureau of Investigation, and other national security and law enforcement experts have warned that digital assets are increasingly being used for money laundering, ransomware attacks, trafficking, and terrorist financing. The Treasury Department on Wednesday said it had imposed sanctions on the operator of a Gaza Strip-based crypto exchange along with other senior Hamas individuals who help manage the group’s investment portfolio. “We're committed to imposing more sanctions alone and in coordination with our partners against Hamas financial network,” Deputy Treasury Secretary Wally Adeyemo said on a call with reporters. The reports that crypto had been used to help finance Hamas are focusing new attention on a bill introduced by Warren and Marshall last year that would impose new anti-money laundering rules on the crypto world. Read more.

Vacancy Announcement for Bankruptcy Judgeship for the District of New Hampshire​​​

The U.S. Court of Appeals for the First Circuit is seeking applicants for a bankruptcy judge position in the U.S. Bankruptcy Court for the District of New Hampshire in Concord. The jurisdiction of a bankruptcy judge is specified in Title 28, United States Code, §§ 151-158, and explained in Title 11, United States Code, § 101, et seq. Attorneys are encouraged to apply, even if their experience is not specifically in bankruptcy law. Interested applicants may obtain an application on the Court of Appeals' website at https://www.ca1.uscourts.gov/employment. Persons applying for this position and willing to serve if selected should personally submit their applications to Susan Goldberg, Circuit Executive, via email at ca01_chjobs@ca1.uscourts.gov. Any applicant must comply with the financial disclosure requirements pursuant to the Ethics in Government Act of 1978, Title 5, United States Code Appendix, §§ 101-111, as implemented by the Judicial Conference of the United States, and will be required to satisfy FBI and IRS background investigations prior to appointment. The term of office is 14 years, and the current salary is $213,992. Applications are to be received no later than Monday, November 27, 2023. Persons will be considered without regard to race, color, age (over 40), gender, religion, national origin, disability, or sexual orientation. Read more.

Sign up Today to Receive Rochelle’s Daily Wire by E-mail!
Have you signed up for Rochelle’s Daily Wire in the ABI Newsroom? Receive Bill Rochelle’s exclusive perspectives and analyses of important case decisions via e-mail!

Tap into Rochelle’s Daily Wire via the ABI Newsroom and Twitter!