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The Boy Scouts of America’s bankruptcy plan for resolving 82,200 claims of childhood sexual abuse hinges on promises of legal immunity for the youth group’s partners, affiliates and insurers, similar to the liability releases that have upended the planned reorganization of opioid manufacturer Purdue Pharma LP, WSJ Pro Bankruptcy reported. In a surprise ruling last week, a New York federal judge overturned a $4.5 billion settlement between bankrupt Purdue and its owners, members of the Sackler family. Purdue’s bankruptcy plan included legal releases shielding the Sacklers, who aren’t in bankruptcy, from pending and future lawsuits over opioid addiction, despite objections from a handful of state attorneys general. The ruling, which will be appealed, said that bankruptcy courts have no authority to sign away creditors’ claims against third parties to a chapter 11 case, like the Sacklers. That has implications for the Boy Scouts, a group that is similarly depending on releases for entities that aren’t themselves in bankruptcy to encourage contributions to a settlement fund. The Boy Scouts entered chapter 11 protection last year in the largest-ever bankruptcy filed over childhood sexual abuse. The group has come up with a settlement plan, now nearing $3 billion, that it hopes will allow it to leave bankruptcy, although lawyers on different sides of the issue have given conflicting information on what abuse victims can expect to receive. Abuse survivors have until Dec. 28 to vote on the Boy Scouts’ settlement offer, which if approved in bankruptcy court would resolve all abuse claims, even those from people who voted no on the plan.

OxyContin maker Purdue Pharma LP spent years building a restructuring plan to settle thousands of lawsuits and deliver funding to combat the opioid crisis. That plan is in limbo after a federal judge ruled that a deal the company struck with its owners isn’t allowed under the law, WSJ Pro Bankruptcy reported. After U.S. District Judge Colleen McMahon’s ruling last week overturning a roughly $4.5 billion settlement between the OxyContin maker and members of the Sackler family who own the company, Purdue, once on the verge of settling an onslaught of lawsuits over its flagship opioid painkiller, will remain in bankruptcy court as it attempts to salvage a settlement that took years and hundreds of millions of dollars to craft. Billions of dollars that Purdue and the family had agreed to pay are now on hold, jeopardizing payouts expected by the people injured by OxyContin overuse and for programs to combat the worsening opioid epidemic. The company so far has spent more than $548 million in fees for lawyers, and other professionals advising the company and creditor groups, according to court papers filed earlier this month. Purdue said in papers filed on Monday in the U.S. Bankruptcy Court in White Plains, N.Y., that although Judge McMahon’s ruling is a “significant setback,” the company believes it has a good chance to win on an appeal.

A group of insurers in the Boy Scouts of America bankruptcy got court approval to delay the start of the hearing on whether to approve the youth group's proposed chapter 11 plan, MarketWatch.com reported. The confirmation hearing will now begin Feb. 22 instead of Jan. 24. The youth group had opposed the delay, saying it would further deplete financial resources that otherwise could go toward sexual abuse survivors. Insurers including Travelers, AIG and Allianz said they needed more time to complete discovery and prepare confirmation objections. Judge Laurie Selber Silverstein in the U.S. Bankruptcy Court in Wilmington, Del., yesterday granted the request, saying several depositions still need to be taken and other work done in an evolving case.

An Aeromexico creditor on Monday objected to the Mexican airline's restructuring plan to emerge from chapter 11 bankruptcy, saying the proposal would unfairly benefit majority shareholder Delta Air Lines Inc., Reuters reported. Invictus Global Management said in a public letter to Delta's board of directors that it opposed the plan put forward by Aeromexico. Aeromexico last week said that an unnamed third party would make a tender offer valuing its outstanding shares at a fraction of their previous market price as part of its efforts to emerge from bankruptcy. Delta's stake would be diluted to 20%, while Apollo Global Management, a fund that often invests in bankrupt companies, would become Aeromexico's biggest shareholder. "Daylight needs to shine on the actions and decisions that could position you to make hundreds of millions of dollars at the expense of other stakeholders, including the many who stand to be economically crushed under the plan preferred by Delta and Apollo," said the letter, signed by Invictus partner Cindy Chen Delano. It added that the proposal included "seemingly egregious financial terms that defy decades of bankruptcy precedent." Invictus is a Delta shareholder as well as a sizeable creditor of Aeromexico, it said.

Non-consensual releases of creditors’ direct claims against a debtor are not permitted by the Bankruptcy Code, according to District Judge Colleen McMahon of Manhattan, who vacated the bankruptcy court’s confirmation of the controversial Purdue Pharma LP chapter 11 plan, according to today's Rochelle's Daily Wire column. Had the reorganization plan been upheld (or if it is upheld after appeal to the Second Circuit), the controlling Sackler family’s $4.325 billion contribution to the reorganization plan would have absolved them from all liability stemming from the opioid crisis, even if creditors with direct claims did not consent. Judge McMahon’s 142-page decision on December 16 is perhaps the most outstanding and remarkable bankruptcy opinion of the decade. Unless reversed on appeal, she will have barred debtors from confirming chapter 11 plans in the Second Circuit with non-consensual releases of creditors’ direct claims against non-debtor third parties. Contrary to what may have been reported in the press, Judge McMahon did not prohibit all non-debtor releases, nor did she bar members of the Sackler family from obtaining releases from perhaps the majority of opioid claims. Judge McMahon’s opinion is narrow. She only barred non-consensual releases where creditors have direct claims against the Sacklers that are not derivative of claims that the company has against family members.

The Archdiocese of Santa Fe’s (N.M.) chapter 11 bankruptcy efforts have plodded along for three years with no end visible in the case involving more than 400 clergy abuse victims, Santa Fe Mexican reported. Lawyers say three years is a comparatively long time for chapter 11 proceedings but is far from unheard of. It’s in everyone’s interests — the archdiocese’s and the victims’ — to resolve it through chapter 11, attorneys say. Therefore, an eventual settlement is still expected. “The alternatives are so bad that it’s worth it to stay in the game,” Laura Coordes, associate professor of law at Arizona State University, said of chapter 11. The archdiocese seeks to raise an adequate sum, through property sales, donations and insurance, to reach settlements with the victims. In a blog this month, Archbishop John Wester wrote: “We knew when we filed for chapter 11 that it would not be easy. We are making progress, albeit slow progress. Please pray that this arduous and drawn-out process will bring healing to the victims of sexual abuse, to their families, our parishes and this local Church.” Coordes and Albuquerque bankruptcy attorney Dave Giddens said the alternatives to a settlement typically would be for the case to be converted to chapter 7 bankruptcy, in which a trustee would call the shots on the sale of assets. Or the case could be dismissed, and many victims then would file lawsuits individually.

Shuttered New York real estate law firm Kossoff PLLC owes more than $28 million to its former clients and other creditors, its founder Mitchell Kossoff told a Manhattan bankruptcy court this week. But that may be understating the firm's liabilities, the trustee overseeing its liquidation said on Friday, Reuters reported. Kossoff pleaded guilty on Dec. 13 to grand larceny and other charges after prosecutors accused him of misappropriating more than $14 million in client funds. He estimated in bankruptcy court papers filed Wednesday that the firm owes creditors twice that amount. Al Togut, the chapter 7 trustee overseeing the dissolution of Kossoff PLLC, said in an email on Friday that Kossoff's accounting is "dated and incomplete." Togut has been seeking records seized from the firm by the Manhattan district attorney's office in its investigation, which he argues he needs for a fuller picture. Now he's closer to obtaining those documents. Togut's attorney told U.S. Bankruptcy Judge David Jones that the district attorney has obtained a court order allowing it to share Kossoff PLLC records with the trustee. Togut said in a Friday email that he will have access to the records soon and expects to take possession of them once Kossoff is sentenced in April. Kossoff could serve a prison term of 4-1/2 to 13-1/2 years, Manhattan District Attorney Cyrus Vance said in a statement.