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Members of the Sackler family that own Purdue Pharma struck a new settlement last week with a group of eight states and the District of Columbia to resolve widespread litigation accusing the OxyContin maker of fueling the U.S. opioid epidemic. Under the new settlement, the Sacklers will pay between $5.5 and $6 billion to a trust that will be used to pay the claims of opioid creditors, including states, victims of addiction, hospitals, and municipalities, Reuters reported. The Sacklers have denied wrongdoing, but expressed "regret" that OxyContin played a role in the opioid crisis. U.S. Bankruptcy Judge Robert Drain must approve the settlement and will consider the matter at a hearing on Wednesday. The deal replaces a previous $4.3 billion agreement, which was upended on appeal after nine attorneys general argued that the Sacklers should not receive sweeping protection from current and future opioid lawsuits as part of the deal. The Sacklers have said in court testimony and filings that a settlement is predicated on them being shielded from opioid-related lawsuits. But these sweeping legal protections must first be written into a chapter 11 plan of reorganization and approved by a bankruptcy judge. To do this, Purdue must overcome the December ruling concluding that the bankruptcy court did not have the authority to release non-bankrupt parties, like the Sacklers, from litigation. Purdue is appealing that decision to the U.S. 2nd Circuit Court of Appeals, and will make oral arguments in that court on April 25. Purdue filed its briefs on Feb. 11, and opposing papers are due on March 11.

More than 50 years ago, nearly a dozen men incarcerated outside of Philadelphia enrolled in an experiment funded by Johnson & Johnson, according to unsealed documents. Now, those studies have come back to haunt the world’s largest maker of health-care products, Bloomberg News reported. In one study, inmates were paid to be injected with potentially cancer-causing asbestos so the company could compare its effect on their skin versus that of talc, a key component in its iconic baby powder. University of Pennsylvania dermatologist Albert Kligman conducted hundreds of human experiments over two decades at Holmesburg Prison in Pennsylvania. The testing regime, funded by entities such as Dow Chemical and the U.S. government, involved mostly Black inmates and first came to light decades ago in books and newspaper articles. But J&J’s involvement in the talc studies focusing on asbestos hasn’t been made public in the media before now. The unsealed prison-testing files came to light in two trials last year over legal claims that J&J’s talc-based powder causes cancer, and legal experts say that information could be powerful evidence in future cases, justifying punishment awards. While they didn’t dispute the company hired Kligman in the 1960s to do baby powder tests, J&J officials said they regretted the firm’s involvement with the dermatologist. Still, they noted the tests didn’t violate research standards at the time.

A lawyer for the U.S. Department of Justice's bankruptcy watchdog on Friday signaled the government would object to a Florida-based nursing home operator's approach to dealing with potential abuse and negligence claims in its plan to wind down its operations, Reuters reported. Joseph McMahon, representing the U.S. Trustee's office, said during a hearing before U.S. Bankruptcy Judge Karen Owens in Wilmington, Delaware, that his office will challenge what he described as non-consensual releases of certain legal claims brought by residents and their families against Gulf Coast Health Care and people and entities with ties to the company. Gulf Coast, which operates 28 nursing homes across Florida, Georgia and Mississippi, filed for bankruptcy in October with more than $200 million in debt, including $49 million in rent owed to its principal landlord, Omega Healthcare Investors. Gulf Coast has been in the process of transferring its facilities to new operators, including Consulate Health Care, Ventura Services — Florida, Citadel Care Centers and Bedrock Care. The company, which ran more than 50 facilities at its peak, blamed the COVID-19 pandemic for the decrease in occupancy levels, staffing shortages and increased costs for labor and personal protective equipment. It was one of several nursing home systems to seek bankruptcy relief as the pandemic led to nursing shortages and higher death rates among the elderly. One of the new operators taking over Gulf Coast facilities, Consulate Health Care, went through its own bankruptcy last year. Read more. 

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One of Iowa’s biggest nursing home chains, now mired in bankruptcy, allegedly owes taxpayers more than $1 million in unpaid fines due to poor quality resident care, the federal government says, the Iowa Capital Dispatch reported. QHC Facilities, which owns eight skilled-nursing facilities and two assisted-living centers in Iowa, filed for bankruptcy in late December. The owner of the company, Nancy Voyna, died a few weeks after the company filed for bankruptcy and her son is now pursuing a sale of the company and all of its assets. The 10 facilities have a combined capacity of almost 750 residents. One potential hurdle to a sale is outlined in recent court filings by the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services. The two agencies provide QHC with a significant portion of its revenue through Medicare and Medicaid payments for resident care. According to CMS, two of QHC’s eight skilled-nursing facilities — one in Mitchellville and one in Winterset — recently faced termination from the Medicare program, which would have shut off all of the federal funding that flows into those homes for resident care. The potential terminations were “based on quality-of-care issues and mold-related issues,” CMS says. Read more.

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Ann Taylor’s former owner has obtained bankruptcy court approval for its revised reorganization plan after a judge rejected certain legal protections for people and entities connected to the company contained in an earlier version of the plan, Reuters reported. U.S. Bankruptcy Judge Frank Santoro of the Eastern District of Virginia signed off on Mahwah Bergen Retail Group Inc.’s amended plan during a brief hearing on Thursday. Mahwah, formerly known as Ascena Retail Group, had secured approval of its prior plan last year but was forced to return to bankruptcy court in January after the plan's so-called nondebtor releases that would have shielded non-bankrupt individuals and entities from future litigation were voided on appeal. Ascena filed for chapter 11 protection in July 2020 with more than $1 billion in debt, part of the wave of retail bankruptcies that occurred in the first few months after the COVID-19 pandemic hit the U.S. Ascena later sold its assets, including apparel retailers such as Ann Taylor, Lane Bryant and Loft, to private equity firm Sycamore Partners. In January, U.S. District Judge David Novak of the Eastern District of Virginia held that the nondebtor releases contained in the plan were void and unenforceable. Judge Novak’s decision did not interfere with the Sycamore sale, which had already closed. In his January decision, Judge Novak called the releases “shocking” and said that the bankruptcy court that approved them had exceeded “the constitutional limits of its authority.” As a result, Mahwah, which now exists solely to wind down its estate, reworked the plan to provide that the releases "should be deemed severed from the Plan,” according to court papers.

A mediator in Purdue Pharma's bankruptcy case on Wednesday indicated an agreement was being drafted between the company's owners and U.S. states pressing for more money to resolve allegations that the OxyContin maker fueled the opioid epidemic, Reuters reported. Members of the wealthy Sackler family, who own Purdue Pharma, have been trying to reach an agreement with eight states and the District of Columbia, after they had blocked a previous settlement that included a $4.3 billion cash payment. The Sacklers had proposed a settlement worth up to $6 billion in mediation, and most of the states had agreed to settle on those terms, according to a report filed in February by mediator Judge Shelley Chapman. Judge Chapman reported yesterday that she was unilaterally extending talks, which U.S. Bankruptcy Judge Robert Drain had allowed if she is actively involved in drafting terms. While neither Purdue nor the mediator offered any details during a Wednesday court hearing, Drain said he believed the mediation was proceeding as hoped after "reading between the lines" of the latest report. To allow the mediation to progress, Judge Drain extended a litigation shield that protects the Sacklers from being sued for their alleged role in the opioid crisis until March 23. The shield would have expired on March 3 if it was not extended.

Lear Capital Inc., a gold and silver coin dealer previously accused of deceiving customers, filed for bankruptcy in Delaware on Wednesday to streamline any future legal spats, Bloomberg News reported. The company in recent years was sued by both the City of Los Angeles and the State of New York for allegedly pressuring elderly customers and misleading them about fees tied to purchases of its coins. Lear was ordered to pay $2.75 million to LA and $6 million to New York as a result. Although those suits are finished, Lear “believes there are, or may be, other outstanding claims of its customers or other agencies that may be formalized in the future,” the company said in its chapter 11 petition. Lear doesn’t expect to be held liable for any future legal claims, but the bankruptcy filing will allow it to simplify the process for future disputes, the company said. “After careful consideration, we determined that through this process the Company could achieve comprehensive resolution of potential government claims while still operating an otherwise financially strong business,” said John Ohanesian, chief executive officer of Lear Capital.

A San Jose hotel owner is seeking bankruptcy court approval to file a malpractice lawsuit against Pillsbury Winthrop Shaw Pittman LLP, saying it didn’t realize it was granting legal immunity for its attorneys when it left chapter 11, WSJ Pro Bankruptcy reported. SC SJ Holdings LLC, owner of the former Fairmont San Jose hotel, on Monday asked the U.S. Bankruptcy Court in Wilmington, Del., for permission to walk back certain provisions of its chapter 11 plan, which was approved last August and took effect in November. The reorganization plan that Pillsbury drafted contains more than five pages about immunity in “legal jargon” that protects the law firm from a range of claims but was impossible to understand, SC SJ said in its filing on Monday. “Pillsbury never informed or explained” to SC SJ that the provisions about legal immunity could absolve the law firm of potential malpractice liability from representing the hotel owner, the filing said. The owner believes it is entitled to seek damages through a malpractice lawsuit. SC SJ said the bankruptcy court should give it limited relief from the part of the approved plan that spells out immunity provisions preventing it from suing Pillsbury for malpractice. “Doing otherwise rewards Pillsbury for obtaining the releases without” the consent of SC SJ “and without the benefit of independent counsel,” the filing said. The Fairmont San Jose hotel, a frequent venue for technology conferences, filed for bankruptcy last March and was closed after a downturn in business events during the pandemic. The hotel is remarketing itself by switching to Hilton Hotels & Resorts ’ Signia brand and is taking reservations for late next month.

The insolvency case of Guo Wengui, the exiled Chinese businessman, got off to raucous start Tuesday when a longstanding creditor called the move “astonishing” and signaled it would wage an aggressive fight in bankruptcy court, Bloomberg News reported. Guo, a former partner of Trump political strategist Steve Bannon, filed for bankruptcy last month after moving a yacht from New York waters, a shift that would keep it out of the reach of creditors, and then facing a $134 million penalty for taking that step. Guo’s biggest creditor is Pacific Alliance Asia Opportunity Fund, which made a loan of $30 million to the businessman in 2008. That loan has since ballooned to more than $116 million with accrued interest. In papers accompanying his bankruptcy filing, Guo said he had almost no assets and little income. But the businessman has often been seen aboard the yacht at issue, a vessel purchased for about $30 million known as Lady May. A New York judge found last month that Guo owns or controls the yacht, an asset that was not disclosed in his bankruptcy filing. “The lack of candor to this court already is what impels us to believe that no quarter should be given,” Peter Friedman, an attorney for Pacific Alliance Asia Opportunity Fund, said at Guo’s first bankruptcy hearing in Connecticut. Friedman said Guo has “a maze of entities, and family members, and trusted confidants to shift around assets” for him and said he can’t be trusted.

U.S. lawmakers are planning legislation to outlaw the controversial bankruptcy maneuver called the “Texas two-step” to prevent large companies from abusing the chapter 11 process, the chair of the Senate judiciary committee has said, the Financial Times reported. Dick Durbin, who is also Democratic whip in the Senate, said negotiations were under way within the committee on a draft bill that would remove what he described as a “get out of jail free card” being deployed by some of the wealthiest companies. His comments follow the failure on Friday by lawyers representing almost 40,000 cancer sufferers to prevent Johnson & Johnson from deploying the bankruptcy scheme to help it settle billions of dollars of claims that its baby talc was tainted with asbestos and caused their illnesses. “When you have massively profitable companies using this bankruptcy maneuver to avoid accountability to dying cancer victims, it’s clear that corrective action is needed,” Durbin told the Financial Times. “It is our goal to pursue bipartisan legislation in committee that curbs corporate bankruptcy abuses like the Texas two-step.” A U.S. bankruptcy judge on threw out a motion by talc claimants to dismiss the bankruptcy of J&J subsidiary LTL management in a ruling that critics warn could open the floodgates for other companies to use the bankruptcy courts to manage personal injury and other tort claims.