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Mass tort exposure has created a proliferation of bankruptcies, affecting organizations from Johnson & Johnson (talcum powder) to the Boy Scouts (sexual abuse), according to a Wall Street Journal commentary. Congress could come up with systemic solutions to the claims-proliferation problem, but that seems unlikely given political gridlock and trial lawyers’ clout, according to the commentary. The Judicial Conference of the U.S., which prescribes the official rules and forms governing bankruptcy practice and procedure, is a more viable avenue for reform. The Judicial Conference could quickly change the claim forms to require greater upfront disclosures—including requiring submission of a specific diagnosis linking the claim to the alleged tort, as well as disclosure of any relationship between the doctor giving the diagnosis and the lawyers—and heightened certification requirements for lawyers and others who help file claims on behalf of tort claimants. Bankruptcy judges could also appoint claims examiners in cases where large numbers of claims are brought into the proceedings to review how claims were generated and to advise judges on their findings, prior to those claims being allowed.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The U.S. Supreme Court review of Purdue Pharma’s $6 billion opioid settlement could open the door for Canada’s municipalities and indigenous First Nations — the only two groups not made up of individual claimants that have opposed the deal — to seek compensation they say has been denied them, WSJ Pro Bankruptcy reported. Purdue’s bankruptcy plan would compensate thousands of individuals, healthcare providers, and U.S. state and local governments accusing the maker of the OxyContin painkiller of helping to fuel the opioid epidemic. But Canadian cities and First Nations don’t have access to the settlement money promised by the Sackler family owners. The bankruptcy plan is being challenged by the U.S. Justice Department, which contests the lifetime immunity the settlement would grant Purdue’s Sackler family owners from opioid-related lawsuits. The Supreme Court heard arguments on the challenge last month. If the Supreme Court rejects the plan, lawsuits that Canadian municipalities and First Nations have filed against Purdue and the Sacklers in Canada and New York could move forward, giving them a new opportunity to litigate their cases for compensation.

A solar company under investigation in Connecticut and around the country filed for bankruptcy, NBCConnecticut.com reported. Vision Solar filed for chapter 7 bankruptcy on December 28. After a joint investigation by the state’s Department of Consumer Protection and Attorney General’s office, the AG’s office sued Vision Solar in March 2023 alleging the company used high-pressure sales tactics, like pressuring consumers into loans for solar panels which they could not afford and in some cases were never activated. In addition, the suit claimed the company did unpermitted work, leaving customers struggling to get connected to the grid as it originally promised, among other allegations.

The slot machine operator formerly known as Lucky Bucks is suing members of its former management and their affiliates, seeking the return of approximately $200 million and accusing them of defrauding the company, WSJ Pro Bankruptcy reported. Now known as Arc Gaming and Technologies, Georgia-based Lucky Bucks emerged from bankruptcy in October. The company’s new management filed a lawsuit in state court on Tuesday under Georgia’s Racketeer Influenced and Corrupt Organizations Act that named nine former high-ranking employees and one contractor as well as a dozen associated entities. The lawsuit alleged Lucky Bucks founder and former owner Anil Damani led a scheme to loot the company. Damani was barred from the company’s operations by a state regulator in June 2020, the lawsuit said. Damani and his lieutenants had Lucky Bucks and its affiliated entities borrow hundreds of millions of dollars from lenders and distributed the proceeds among themselves, the lawsuit said. The mounting debt ultimately pushed the company to file for chapter 11 bankruptcy protection last June, the lawsuit said. Lucky Bucks covered about 345 locations throughout Georgia with about 2,300 slot machines when it filed for bankruptcy. It blamed a sharp decline in revenue in 2022 caused by challenges such as increased local competition and regulatory enforcement. Lucky Bucks handed itself to its lenders in exchange for reducing its debt by more than $500 million under the company’s chapter 11 plan, which was approved in July.

FTX is on the hunt for billions of dollars that the cryptocurrency exchange says it is owed. Since filing for bankruptcy in November 2022, the company — through a dozen or so lawsuits — has been trying to claw back the money. FTX is expected to file more such lawsuits in 2024, WSJ Pro Bankruptcy reported. “There are many more actions coming as a result of our comprehensive investigation,” an FTX spokesperson said. In a September presentation to creditors, FTX said it had identified $16.6 billion in such potential actions. “We are highly confident there will be significant recoveries for creditors from these new actions,” as well as from pending cases and other investigative efforts, the FTX spokesperson said. The company faces 36,075 customer claims for a total of $16 billion. FTX has said customers would get as much as 90% of whatever is recovered during the bankruptcy. Roughly $9 billion of customer deposits remain unaccounted for.

The Franciscan Friars of California, a Roman Catholic organization devoted to serving the poor, has filed for bankruptcy after facing nearly 100 lawsuits related to decades-old sex abuse claims, Reuters reported. The Oakland, Calif.-based organization said in a Tuesday statement that it was driven to bankruptcy by a change in California state law that allowed sex abuse survivors to file decades-old complaints that were otherwise time-barred under the state's statute of limitations. The Franciscan Friars of California joins a growing wave of Roman Catholic organizations that have filed for bankruptcy to address sex abuse lawsuits. Most of the 94 lawsuits filed against the Franciscan Friars were filed in California, where a 2019 law revived older sex abuse claims and led to the bankruptcies of the Catholic dioceses of San Francisco, Oakland and Santa Rosa. All of the recent lawsuits against the Franciscan Friars of California are based on abuse that allegedly occurred at least 27 years ago, the group said in a Tuesday statement. Most of the friars accused of abuse are deceased, and the organization has long since cut ties with the six who are still alive, the group said.

Former Houston bankruptcy judge David Jones has asked a federal court to toss a lawsuit that revealed his romantic relationship with a bankruptcy attorney and ultimately led to his resignation, saying he cannot be personally sued over his rulings as a judge, Reuters reported. Jones, who oversaw the complex case panel in the Southern District of Texas and was the busiest bankruptcy judge in the U.S., said in October he would resign after publicly acknowledging he had been living for years with his longtime romantic partner Elizabeth Freeman, who was a bankruptcy partner at the law firm Jackson Walker until December 2022. The firm represented many companies that filed for bankruptcy in Jones' Houston court, often acting as local counsel for larger law firms like Kirkland & Ellis. Jones acknowledged the years-long relationship in the wake of an Oct. 4 lawsuit by a McDermott International shareholder, who sued Jones over his rulings in the energy company's bankruptcy. The U.S. Court of Appeals for the Fifth Circuit initiated a misconduct complaint and said that there was probable cause to believe that Jones committed an ethical violation by failing to disclose his relationship, but the court ended its investigation when Jones resigned.