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China Evergrande Group and some of its biggest offshore creditors have reached agreement on moving restructuring talks forward, helping stave off their threats of taking over the company’s offshore businesses after $2 billion in offshore cash was seized by banks, WSJ Pro Bankruptcy reported. Evergrande agreed in principle late last week to pay bondholders’ advisory fees, provide additional due diligence on the company’s financial health, and give creditors a formal role in the restructuring process. The fee- and information-sharing agreement is seen as a moderate step in the right direction rather than substantial progress to restructure Evergrande’s debt. Bondholders appear to be changing tack after they threatened to sue Evergrande in January for allegedly stonewalling discussions with them. Tensions simmered again after Evergrande disclosed in March that banks had taken control of more than $2 billion held by one of its key subsidiaries. Evergrande reached out to an organized committee of foreign bondholders soon after the beginning of the Chinese Lunar New Year to move talks along. The discussions first focused on reaching an agreement over paying creditors’ advisory fees, until Evergrande disclosed the $2 billion cash seizure at its Hong Kong-registered property management arm.

A Bermuda fund linked to billionaire Robert Brockman has landed in U.S. bankruptcy court after the Internal Revenue Service said it may seize some of the fund’s assets at Vista Equity Partners to satisfy tax debts owed by Brockman, Bloomberg News reported. The bankruptcy filing by Point Investments Ltd. may frustrate IRS efforts to quickly collect $1.46 billion in taxes it’s seeking from Brockman, 80. Prosecutors separately charged him in the largest U.S. criminal tax-evasion case against an individual, alleging he dodged taxes on $2 billion in income.

Bankruptcy Judge Michael Kaplan said that a federal appeals court should weigh in as soon as possible on his ruling permitting Johnson & Johnson to move mass talc litigation to chapter 11, as the company and plaintiffs’ lawyers prepare for mediated settlement talks, WSJ Pro Bankruptcy reported. Judge Kaplan yesterday granted requests from talc injury claimants for an immediate appeal of his February ruling keeping their lawsuits against J&J frozen in chapter 11 proceedings. The judge allowed a J&J subsidiary to remain in chapter 11, likely aiding the company’s efforts to settle current and future claims linking its talc-based baby powder to cancer. Injury claimants argued that J&J’s strategy isn’t permitted by the bankruptcy code and have sought to overturn Judge Kaplan’s ruling. In it, he found the talc claimants as a whole were better off in chapter 11 than suing J&J the tort system. “The question of the proper venue to litigate mass tort cases has been brought to the forefront and has generated the interest…of policy makers, media, a few very nasty people on Twitter and the like,” Judge Kaplan said. At stake are the roughly 38,000 lawsuits as well as potential future liability tied to J&J’s talc-based products, which the company stopped selling in the U.S. and Canada in 2020. The company has denied that its talc caused cancer and said a bankruptcy filing is the best way to get compensation to the most claimants quickly. Judge Kaplan said that J&J’s strategy not only involves tens of thousands of injury claimants and “billions upon billions of dollars” but raises novel legal questions which have broader implications on how future mass torts are litigated and resolved. An appellate court could weigh in on the judge’s analysis of the benefits of the bankruptcy process over the civil trial system, a factor in his conclusion that J&J had a valid purpose in moving its talc liability into chapter 11, Judge Kaplan said. Read more.

Don't miss an expert panel at ABI's Annual Spring Meeting examining a full range of issues related to the “Texas Two-Step” strategy to separate tort liabilities from core assets and resolve them through the chapter 11 process. Learn more about this session and register today! 

An Erie County jury has awarded $25 million to a 62-year-old retiree who was sexually abused as a boy by his Boy Scout leader, in what may be the first jury verdict in the state for a Child Victims Act lawsuit, the Buffalo News reported. The jury of three men and three women decided Wednesday that Robert L. Eberhardt, a twice-convicted former Scout leader who lives in Arcade, Wyoming County, should pay $15 million for pain and suffering to the plaintiff and $10 million in punitive damages. Eberhardt, 80, did not appear in court to defend himself. He was found liable for the abuse in 2021 in a default judgment by State Supreme Court Justice Mark Grisanti, who presided at the jury trial for damages. The plaintiff, an Erie County husband and father of three identified in court papers and in the courtroom as LG 40 Doe, wiped tears from his eyes and shifted uncomfortably in his seat while recounting details of the abuse that began when he was a 10-year-old Scout in a Cheektowaga troop where Eberhardt was the Scout leader. The plaintiff’s attorney, Amy Keller, had asked the jury to consider a $15 million award, with $10 million for pain and suffering and $5 million in punitive damages. The jury deliberated for less than 40 minutes before delivering its unanimous decision.

The Boy Scouts of America’s sexual abuse compensation fund may force insurers to make payments they can’t negotiate over, even if the claims are fraudulent, a group of the companies argued in court, Bloomberg News reported. Insurers, including American International Group, Liberty Mutual Insurance and Travelers Casualty and Surety, began their case against the biggest-ever compensation fund for abuse victims by presenting an academic on Tuesday who argued the plan creates a “moral hazard” for insurers. Proposed rules for paying victims take away the right of insurance companies to defend themselves and remove any incentive for the Boy Scouts to fight for reduced payout, said Scott Harrington, a professor of insurance and risk management at the University of Pennsylvania’s Wharton School. Insurers were excluded from a key round of negotiations in which the plan was put together by the Boy Scouts and advocates for as many as 82,000 sex-abuse victims, Harrington told U.S. Bankruptcy Judge Laurie Silverstein during the trial, which is being held by video.

The U.S. bankruptcy system is facing a backlash from all three branches of the federal government as big companies and wealthy individuals push the limits of chapter 11 to relieve themselves of legal and financial liabilities, the Wall Street Journal reported. The pushback stems in part from the continuing bankruptcy of Purdue Pharma LP, the OxyContin maker that filed for chapter 11 to resolve mass lawsuits alleging that the company and its owners, members of the Sackler family, helped fuel opioid addiction. The Justice Department and some members of Congress have said the bankruptcy case was misused to benefit the Sacklers at the expense of people who became addicted, while a federal judge last year overturned Purdue’s proposed settlement to provide the family with sweeping protection from civil opioid litigation. Other companies, such as former Ann Taylor owner Ascena Group Inc., also tried to use bankruptcy to protect insiders from litigation over alleged corporate wrongdoing. Johnson & Johnson has accessed the bankruptcy system to shield its profitable business assets from lawsuits alleging its talc-based baby products caused cancer. For decades, corporations have been using chapter 11 to break burdensome contracts, shed unsustainable debt and resolve litigation. Now, lawyers are turning the same tools on a new class of legal adversaries, namely individual claimants who allege they were harmed by dangerous products or other corporate malfeasance, said Steven Rhodes, a former judge who oversaw the city of Detroit’s bankruptcy. In particular, the bankruptcy cases filed by Purdue and J&J to protect themselves from opioid addiction and talc-related lawsuits have “brought to light the injustice and unfairness of it,” Mr. Rhodes said. The U.S. Trustee has been lodging objections and appeals in response to new efforts by companies and their advisers to push the limits of what chapter 11 enables them to do, according to the office’s director. Clifford White, who has served as director since 2006, said companies and advisers “have been testing the boundaries of the bankruptcy code. We think that there has been overreaching in how the bankruptcy code is used.” Some higher courts have agreed. In December, a federal judge in New York overturned a roughly $4.5 billion settlement in the Purdue case that would have shielded the Sackler family from civil legal liability tied to the opioid crisis. Read more. (Subscription required.) 

Don't miss an expert panel at ABI's Annual Spring Meeting examining a full range of issues related to the “Texas Two-Step” strategy to separate tort liabilities from core assets & resolve them through the chapter 11 process. Learn more about this session and register today! 

A running battle with insurers may prolong a resolution to the Archdiocese of Santa Fe’s clergy sex abuse bankruptcy case, the Santa Fe New Mexican reported. The chapter 11 bankruptcy, involving about 400 victims, has plodded on for nearly 3½ years. The archdiocese and four insurance companies are now ensnared in a legal confrontation of their own, one that has thrown a difficult twist into the high-profile case. At issue is how big a share of a proposed settlement with victims the insurance companies should pay. Insurers’ participation is expected to be a vital element in the effort to settle with the victims. The delay in reaching a settlement between the archdiocese and victims has significant financial implications: Bankruptcy court records show the archdiocese has spent $5.7 million on professional fees in the case, including payments for lawyers and financial advisers. It’s a sum that will rise if the proceedings drag on. Attorneys met on Friday with U.S. Bankruptcy Judge David Thuma for a status conference, with mediation scheduled to continue today and Tuesday.