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The Roman Catholic Diocese of Rochester, N.Y., last week filed an amended reorganization plan in its chapter 11 bankruptcy, which is inching toward a final settlement with hundreds of survivors of decades-old sexual abuse by priests and other church officials, the Rochester Beacon reported. The amended plan adds $51.75 million to the $75.6 million trust amount stated in the plan the diocese filed in March. The added amount reflects sums two insurers agreed to contribute months after the first plan was drafted. It also makes technical changes intended to head off insurance-company objections in how payments to survivors would be made. There is a complication, however. The diocese plan will face off against a rival plan filed by the Continental Insurance Co. Continental, known as CNA, is one of several liability carriers that the diocese has long made clear it expects to pay for much of any settlement that might be worked out. Whether CNA has standing to file its own plan is a question still to be decided by court. At stake is how much and how soon compensation will be doled out to some 485 sexual abuse survivors who have so far waited four years to see the case resolved. The diocese asked for court protection in September 2019, a month after the New York Child Victims Act took effect. The CVA opened a temporary window for victims of childhood sexual abuse to go after abusers, temporarily nullifying a statute of limitations that had protected abusers. With the CVA in place, thousands of men and women across New York filed state court actions accusing Catholic dioceses around the state of allowing priests and other church officials to sexually abuse them as children. The Rochester diocese was first in the state to seek court protection. Several other dioceses have since followed. None have yet been resolved. CNA is the only one of several insurers involved in the Rochester diocese bankruptcy that has refused to sign on to a settlement painfully worked out after years of court-ordered negotiations among the diocese, other insurers and a committee representing the interests of abuse survivors with claims in the bankruptcy.

The Senate Judiciary Committee will be holding a hearing today at 10 a.m. EDT titled "Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy." Witnesses include Prof. Melissa B. Jacoby of UNC School of Law (Chapel Hill, N.C.), Lori Knapp (Greeneville, Tenn.), Prof. Samir D. Parikh of Lewis & Clark Law School (Portland, Ore.), Stephen Hessler of Sidley Austin LLP (New York) and Erik Haas of Johnson & Johnson (Armonk, N.Y.). To view a live webcast of the hearing and to view prepared witness statements, please click here.

When investors took over prison healthcare provider Corizon in December 2021, it was on the brink of a bankruptcy filing to weather the loss of key contracts, hundreds of prisoner lawsuits and mounting debts to hospitals and doctors, WSJ Pro Bankruptcy reported. The company, among the nation’s largest correctional health companies, is now nearing a chapter 11 restructuring that would settle those claims for less than its creditors have demanded—without ever appearing in bankruptcy court itself. Its owners could retain control of the business, cleansed of old debts and lawsuits, as it rebuilds its market share under its new brand name, YesCare. YesCare has put a new spin on the Two-Step. The company split itself in May 2022 into an operating business holding its government contracts and a Texas subsidiary called Tehum Care Services that was made responsible for its unpaid bills and legal liabilities. Tehum then filed for chapter 11 in February, carrying into bankruptcy court the debts and liabilities to prisoners, healthcare providers, insurance companies and others accumulated under the company’s prior ownership. In bankruptcy, Tehum has powerful tools at its disposal to resolve creditors’ claims against it—and against its rebranded affiliate YesCare.

Bankrupt drugmaker Mallinckrodt is in talks with major investors about selling some or all of its business units, which could lead to its exit from the opioid business, according to a WSJ Pro Bankruptcy report. Some investors, poised to take control through the company's ongoing bankruptcy proceedings, are suggesting Mallinckrodt break up its business units. The Ireland-based company filed for its second bankruptcy in the United States last month, with a restructuring plan that would cut $1 billion from what it owes to victims of the U.S. opioid crisis. Mallinckrodt, which makes both branded and generic drugs, had first filed for bankruptcy in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids and disputes over its drug pricing. As part of its plan to emerge from bankruptcy in June 2022, the company, which denied wrongdoing, agreed to pay $1.7 billion to settle about 3,000 lawsuits alleging it used deceptive marketing tactics to boost opioid sales. Mallinckrodt also disclosed in filings with the Securities and Exchange Commission last month that it recently received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia, seeking information about its reporting of suspicious opioid orders to the U.S. Drug Enforcement Administration.

For months, John Jay Ray III, the corporate turnaround expert who was appointed to oversee the bankruptcy of the FTX crypto exchange, has attacked the company’s founder, Sam Bankman-Fried, accusing him of “old-fashioned embezzlement.” Now, Mr. Ray has a new target: Mr. Bankman-Fried’s parents, the New York Times reported. FTX yesterday filed a lawsuit in federal court in Delaware accusing Joe Bankman and Barbara Fried, longtime Stanford law professors, of using their “access and influence within the FTX enterprise to enrich themselves.” The lawsuit seeks to claw back millions of dollars the couple received from their son. In the complaint, FTX’s lawyers said that Mr. Bankman and Ms. Fried got a $10 million cash gift from Mr. Bankman-Fried, as well as a $16.4 million home in the Bahamas, where FTX was based, that was purchased by the exchange. The suit also claims that Mr. Bankman helped cover up complaints by a former lawyer for his son’s business, and that Ms. Fried coached Mr. Bankman-Fried and another FTX executive to evade disclosure requirements for political donations.

A federal bankruptcy court hearing on Endo International's proposal to sell the pharmaceutical company to its senior lenders, which are owed nearly $6 billion, will not be held until October, the Philadelphia Business Journal reported. The hearing was initially slated to take place in late August. It was rescheduled for last week, before being rescheduled again. The new hearing date is Oct. 19 at 11 a.m. in the U.S. Bankruptcy Court for the Southern District of New York. Objections must be filed by Oct. 12. No reason for the delay was provided in court documents. Endo is domiciled in Ireland and has its U.S. headquarters in Malvern, Pa.. The company filed for chapter 11 bankruptcy protection last August while dealing with thousands of opioid-related lawsuits and with mountings debts of about $8 billion. The company — which now focuses on specialty pharmaceuticals, sterile injectable drugs and generic medicines — marketed generic pain medicines containing opioids up until late 2016. Its proposed deal to emerge from bankruptcy includes a provision under which the senior lenders agree to fund the almost $600 million in opioid settlements that Endo has agreed to pay to U.S. states and people affected by opioid addiction. The senior lenders have also agreed to establish a trust for future opioid claimants. The transaction has drawn objections from four federal agencies — the Department of Justice, the Internal Revenue Service, the Department of Health and Human Services and the U.S. Department of Veterans Affairs. The government said that the deal violates U.S. bankruptcy law because it provides payments to some of the company's creditors, including the opioid claimants, while federal government agencies and other creditors "have been singled out to recover nothing." In its objection, the government agencies called the proposed sale "an abuse of the bankruptcy system that is plainly unlawful and should be rejected by this court." Additionally, the court filing notes, the Department of Justice is pursuing billions of dollars in claims against Endo tied to alleged tax debts, overpayments for the company's medications by the government, and its ongoing criminal investigation into the company's opioid marketing practices.

SVB Financial Group, the former parent of Silicon Valley Bank, is closing in on a deal to sell its venture-capital and credit-investment arm out of bankruptcy, the Wall Street Journal reported. Two front-runners are vying in the bidding process for SVB Capital: a duo of Anthony Scaramucci’s SkyBridge Capital and Atlas Merchant Capital, and San Francisco private-equity firm Vector Capital. A court decision on a winner is expected in the next few weeks. The business could fetch anywhere between $250 million and $500 million, the people said, cautioning that a transaction still isn’t guaranteed and would need to be reviewed by the creditors’ committee too. Bankers at Centerview Partners have been advising the parent company on the process. In March, Silicon Valley Bank failed and was taken over by regulators, kicking off a mini-banking crisis that later took down Signature Bank and First Republic. SVB Financial Group filed for chapter 11 protection in New York bankruptcy court, paving the way for a sale of its assets after the technology-focused lender at the core of its business was seized by regulators.

Just when you think the debate about the legal, ethical or practical implications surrounding third-party releases in mass tort chapter 11 cases cannot get any more convoluted, another real-world example rears its ugly head and makes our brains hurt again, according to a new commentary from Tom Salerno of Sintson LLP (Phoenix). Truth is indeed stranger than fiction! In last Monday’s Law360, it was reported that LTL Management LLC (LTL), the Johnson & Johnson (J&J) subsidiary into which its talcum powder claims were deposited, is suing a doctor who published a report linking talcum powder (specifically asbestos in talcum powder) to personal injuries (mesothelioma). Of course, we are all aware that prior to this announcement, J&J and LTL had been dealing with thousands of claims that talcum powder produced by J&J caused cancer (the “Cancer Talcum Claims”). It is unclear how widespread the victim class is for this new aspect of poisonous talcum powder (the “Asbestos Talcum Claims”), but let’s posit for a moment that this becomes a large class of victims. To set the stage, we are all aware that LTL has been bounced out of bankruptcy not once, but twice by the Third Circuit based on essentially lack of good faith and the unavailability of third-party releases for mass tort trust settlement devices to deal with the Cancer Talcum Claims. Let’s call this the “Mass Tort Settlement Protocol,” which funnels victims’ claims into a trust funded by the debtors and third parties (such as insurance companies and, in the Purdue Pharma case, Sackler family members and controlled entities), and which provides releases to those third parties who fund the trust, exchanging civil liability for payments to the trust. Not surprisingly, third-party releases are an integral and essential part of the Mass Tort Settlement Protocol. No release, no funding. Read the full commentary.
*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.

Salerno will be one of the featured panelists on the "SCOTUS Crossfire: Will Purdue Be the Last Mass Tort Bankruptcy?" abiLIVE webinar on Oct. 4. See the full panel of experts and register today for FREE by clicking here.

FTX objected to BlockFi’s bankruptcy plan Wednesday, claiming it “still suffers from certain fundamental shortcomings,” BlockWorks reported. FTX’s attorneys believe that “the Plan unfairly discriminates against the FTX Claims in certain respects” and have asked the court to deny the plan. The opposition comes after BlockFi claimed it fell victim to FTX’s former CEO Sam Bankman-Fried actions. FTX is accused of misappropriating and commingling customer funds with Alameda Trading, its sister firm, in a scheme to defraud investors. FTX is attempting to recover both loan repayments and collateral from the bankrupt crypto lender. “The FTX Debtors do not seek to impede the BlockFi Debtors’ efforts to return value to their creditors, but, in the absence of a consensual resolution, must ensure any plan is fair to the FTX Debtors’ creditors, who are the beneficiaries of the FTX Claims,” the Wednesday filing said.