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Relatives of children killed in the 2012 Sandy Hook massacre could have a harder time collecting from far-right radio host Alex Jones under the legal strategy being employed by the conspiracy theorist, Bloomberg News reported. Companies tied to Jones filed for bankruptcy on Sunday seeking special rules reserved for small business owners who have fallen on hard times. Those rules would speed up proceedings and reduce the families’ influence on the reorganization by preventing them from forming a creditors committee. Jones acknowledged in an internet broadcast that his Infowars empire is under heavy financial strain and asked listeners for money. The relatives of Sandy Hook victims won key court rulings against Jones after he called the shootings a hoax. A trial in Connecticut will eventually determine the size of the damages. He was also found liable in similar proceedings in Texas. Three entities, including one that holds the rights to the website Infowars, sought chapter 11 protection in Victoria, Texas. Each estimated liabilities of as much as $10 million, according to court filings. Jones’ main holding company, Free Speech Systems LLC, didn’t file for bankruptcy. Under small-business bankruptcy rules, known as Subchapter V, the Sandy Hook families won’t be able to join an official committee of creditors, which can have influence in major corporate cases but aren’t typically set up in Subchapter V filings. Subchapter V cases are limited to private companies that face only a few million dollars in debt, and rarely involve complicated legal disputes like whether a parent company can be shielded from lawsuits without filing for bankruptcy itself. In the Infowars bankruptcy, lawyers set up a trust that would pay people suing the companies, and Jones handed over his equity in the entities to the trust. The units in bankruptcy “have no purpose other than to hold assets which may be used by other entities” and their only liabilities are the litigation claims, according to court papers. By establishing a trust to settle legal claims in bankruptcy, Jones’s companies are following a controversial playbook used by other corporations facing significant lawsuits. Companies including opioid maker Purdue Pharma LP and youth organization Boy Scouts of America have sought chapter 11 protection to settle thousands of cases and streamline payouts to victims claiming harm. Jones put $725,000 of his own money into the trust to cover the costs of the chapter 11 filings. Additional funds, including $2 million cash, could flow into the trust as a result of the bankruptcy, according to court papers. The trust is a way to ensure litigation creditors can be paid in full, rather than get uneven payouts simply due to the timing of trials, lawyers for the companies said in court papers. Jury selection for the Texas trial is set to begin next week, while the Connecticut trial is still months away.

Johnson & Johnson said yesterday that it agreed to pay $99 million to settle claims by West Virginia that it helped fuel an opioid addiction crisis in the state, removing the company from an ongoing trial that began earlier this month, Reuters reported. West Virginia is still pursuing claims against Teva Pharmaceuticals Industries Ltd and AbbVie Inc's Allergan in the Kanawha County Circuit Court trial for their alleged role in the crisis. The state accused the companies of causing a "tsunami" of addiction. J&J did not admit liability or wrongdoing in the settlement, the company said. The other companies, which have previously denied the accusations, did not immediately respond to requests for comment. West Virginia previously reached a $26 million settlement with Endo International Plc, which had also been a defendant in the ongoing trial.

A company owned by far-right radio host Alex Jones filed for bankruptcy after being hit by a flurry of lawsuits, Bloomberg News reported. Infowars sought chapter 11 protection in Southern Texas, with liabilities of as much as $10 million, according to a court filing. Chapter 11 filings allow a business to keep operating while working on a turnaround plan, and pause pending civil litigation. Jones and his companies last year were found liable in a defamation lawsuit brought by relatives of children killed in the 2012 Sandy Hook school massacre after Jones called the shootings a hoax. A trial in Connecticut to determine the size of the damages has yet to take place. He was also found liable in similar proceedings in Texas.

The Boy Scouts of America yesterday wrapped up a month-long court hearing over its proposed reorganization plan and $2.7 billion settlement of claims by thousands of men who say they were sexually abused as children by troop leaders, Reuters reported. Bankruptcy Judge Laurie Selber Silverstein said at the conclusion of the trial that she would rule on the plan and settlement as soon as possible. Lawyers for the youth organization, which has been hit with more than 82,000 abuse claims, said it hopes the settlement will allow it to exit chapter 11 and continue its Scouting mission. Though the deal has support from 86% of abuse claimants who voted on the plan, hundreds of local councils and the Boy Scouts’ two primary insurers, the process of securing approval and emerging from bankruptcy has been contentious for the Irving, Texas-based organization. The Boy Scouts filed for bankruptcy in February 2020 to address sex abuse allegations spanning decades. The plan, if approved, will set up a $2.7 billion trust to be used to compensate survivors who filed claims in the bankruptcy — with the amount tied to the severity of the alleged abuse, and where and when it occurred. The federal government's bankruptcy watchdog, the U.S. Trustee, opposed the plan’s non-debtor releases, which protect people and entities related to the debtor that have not filed for bankruptcy themselves against future litigation. U.S. Trustee attorney David Buchbinder argued on Wednesday that the releases are being given to an overly broad group who he said have not made substantial contributions to the settlement in exchange. Buchbinder also accused the organization of relegating survivors “to a years-long administrative process” designed to be “difficult, expensive and confusing.” Boy Scouts’ attorney Jessica Lauria defended the releases, saying that they were necessary to secure financial contributions for the trust and that many other courts have upheld similar releases.

The operator of the Edgemere luxury senior-living community in Dallas filed for bankruptcy Thursday after being hit by higher labor costs and lower occupancy rates during the COVID-19 pandemic, WSJ Pro Bankruptcy reported. The worsening business conditions have led the nonprofit operator, Northwest Senior Housing Corp., doing business as Edgemere, to default on its bonds and breach agreements with its landlord, according to a court filing. Edgemere has also filed a lawsuit against its landlord, Intercity Investment Properties Inc., alleging it had dealt with the senior-living operator in bad faith. According to a separate filing Edgemere made in bankruptcy court Thursday, Intercity has been attempting to oust Edgemere and take over management of the 504-unit property. In the lawsuit, Edgemere accuses Intercity of leaking confidential information about the senior community and calling residents to scare them about Edgemere’s financial conditions, the filing said. Read more. 

Don’t miss a session discussing the effects that COVID-19 has had on operational and financial performance, business models past and future, and the real estate valuations of senior living facilities at the upcoming Annual Spring Meeting, April 28-30 in Washington, D.C. Click here for more information and to register. 

A bankruptcy judge asked the Boy Scouts of America to justify why more than 100,000 groups that have supported its mission but themselves aren’t in chapter 11 are getting legal protections through the youth organization’s restructuring, WSJ Pro Bankruptcy reported. Judge Laurie Selber Silverstein on Tuesday also asked the youth group why it needed such an “elaborate, interconnected” bankruptcy plan when at one point the nonprofit’s reorganization blueprint addressed only its own financial troubles. The Irving, Texas-based group, which filed for bankruptcy in 2020, is in the fifth week of a trial seeking court approval of a $2.7 billion compensation fund that would settle about 82,200 sexual-abuse claims. Nearly 86% of the votes cast favor the group’s plan. One “thing that’s extraordinary about this case is the sheer magnitude of the number of releases being sought here,” said Judge Silverstein, of the U.S. Bankruptcy Court in Wilmington, Del. She said she heard the number grew to include 100,000 partner organizations. “And then I heard 140,000,” she said. Judge Silverstein asked lawyers for the youth group to discuss those numbers and why they are justified. Boy Scouts lawyer Jessica Lauria said the group’s sponsors, known as chartered organizations, are typically nonprofits like individual churches and parishes.

Johnson & Johnson can’t use its baby powder bankruptcy to prevent a lawsuit that accuses the company of hiding evidence that its industrial talc operation exposed workers to the toxic material asbestos, a federal judge ruled. The judge overseeing the bankruptcy case of LTL Management sided with the family of a man who sued J&J in 1986. The man agreed to drop his lawsuit after the company produced sworn testimony claiming no tests ever showed J&J’s industrial talc contained asbestos, according to court documents. He died in 1994. The family now plans to sue J&J, saying that testimony was false, citing new evidence. In court papers, lawyers for the family allege that thousands of asbestos suits against J&J failed because of false information provided by the company. Asbestos is an industrial material that is known to cause fatal lung disorders. Until it was found to be toxic, the product was used in everything from insulation to automobile brakes. Since the 1980s, companies have paid tens of billions of dollars to hundreds of thousands of victims.

Protecting local Boy Scouts of America councils and troop sponsoring organizations from future liability for child sex abuse claims is critical to the national group’s reorganization plan, BSA attorneys told a Delaware bankruptcy judge Tuesday, the Associated Press reported. Attorneys opposing the plan countered that liability releases for non-debtor third parties are neither fair nor necessary, and that they infringe on the rights of abuse survivors to seek compensation for their abuse. The Boy Scouts, based in Irving, Texas, petitioned for bankruptcy protection in February 2020, seeking to halt hundreds of individual lawsuits and create a settlement trust for abuse victims. Although the organization faced about 275 lawsuits at the time, more than 82,000 sexual abuse claims have been filed in the bankruptcy case. The reorganization plan calls for the Boys Scouts and its 250 local councils, along with settling insurance companies and troop sponsoring organizations, to contribute some $2.6 billion in cash and property and assign their insurance rights to a settlement trust fund for abuse victims. More than half that money would come from the BSA’s two largest insurers, Century Indemnity Co. and The Hartford. Those companies would contribute $800 million and $787 million, respectively.