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U.S. District Judge Colleen McMahon in Manhattan overturned a roughly $4.5 billion settlement between OxyContin maker Purdue Pharma LP and members of the Sackler family who own the drugmaker, a surprising decision that raises questions about the future of the company and its owners, who have been accused of fueling the nation’s opioid crisis, the WSJ Pro Bankruptcy reported. Judge McMahon ruled late yesterday that the legal releases that would shield members of the Sackler family from civil opioid lawsuits are not permitted under the Bankruptcy Code. A handful of state attorneys general and the Justice Department’s bankruptcy watchdog challenged the releases, which would have extinguished the states’ potential legal claims against the Sacklers even though they didn’t support the deal. Such settlements have been used in other large corporate bankruptcies, though Congressional Democrats introduced a bill earlier this year in response to the Purdue settlement that would ban these types of releases. The decision is likely to result in further appeals from Purdue, the Sacklers and groups representing opioid victims and other company creditors who supported the settlement and broader reorganization plan. Judge McMahon said that prior legal rulings from the Second U.S. Circuit Court of Appeals that Purdue and other bankrupt companies have relied on in advancing the types of legal releases the Sacklers would receive haven’t properly analyzed the issue. She said that her ruling Thursday won’t be the last word on the issue. “It must be put to rest sometime; at least in this Circuit, it should be put to rest now,” Judge McMahon said. The family settlement was the centerpiece of a larger financial restructuring of Purdue designed to fund programs to fight the opioid crisis and compensate people harmed by OxyContin. State attorneys general from Washington, Connecticut, Maryland and other states had objected to the settlement, arguing the Sacklers’ contribution was insufficient to deter other corporate wrongdoing. Read more. 

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An attorney for the Diocese of Norwich (Conn.) told a federal bankruptcy court judge on Wednesday that it expects to file a proposed bankruptcy plan by April 1 to resolve claims by at least 70 people who say they were sexually assaulted by priests and employees affiliated with the diocese, The Day reported. During the remote hearing before Judge James Tancredi, attorneys for both the Roman Catholic diocese and the committee that represents the claimants also agreed to a plan that temporarily would limit the large sums of money being spent by the diocese on legal and financial services fees. Over the past few months attorneys for the alleged victims — as well as Tancredi — have expressed concern that the millions of dollars in fees will reduce the money that eventually will be available to distribute to the victims. The diocese filed for chapter 11 bankruptcy in July as it faced more than 60 lawsuits filed by young men who charge they were sexually assaulted as boys by Christian Brothers and other staff at the diocese-run Mount Saint John Academy in Deep River from 1990 to 2002. Mount Saint John was a residential school for troubled boys whose board of directors was headed by retired Bishop of Norwich Daniel Reilly. Since then, additional people whose sexual assault allegations involved not only Mount Saint John but diocesan churches have filed claims in the bankruptcy case. Victims have until March 15, 2022, to file claims.

A bankruptcy judge gave Brazos Electric Power Cooperative Inc. more time to formulate its own restructuring plan, ruling against two member-owner cooperatives that have criticized its focus on raising debt to cover the steep costs of a freak winter storm in Texas in February, WSJ Pro Bankruptcy reported. Tuesday’s ruling by Judge David Jones of the U.S. Bankruptcy Court in Houston extends the deadline for Brazos to file a restructuring plan through next March and to solicit votes through May without the risk of a competing plan from creditors. Waco, Texas-based Brazos was the biggest Texas power company to fall victim to the winter freeze earlier this year, which knocked power plants offline and left millions of customers without electricity for days. Brazos racked up roughly $1.9 billion in charges from the state’s grid operator, the Electricity Reliability Council of Texas, during the winter storm and another roughly $180 million buying natural gas. Brazos has challenged the invoices from Ercot in bankruptcy court, a continuing dispute at the heart of the bankruptcy case, Brazos lawyer Louis Strubeck said during Tuesday’s court hearing.

A Canadian court ordered Cineworld Group PLC to pay 1.29 billion Canadian dollars, equivalent to about $1 billion, in damages for walking away from a merger agreement with Cineplex Inc. after the COVID-19 pandemic rocked the movie-theater industry world-wide, WSJ Pro Bankruptcy reported. An Ontario judge rejected arguments by U.K.-based Cineworld that Canada-based Cineplex violated the terms of a planned merger between the two companies when it took steps to conserve cash by deferring payments to landlords, vendors and film studios after box offices shut down in the early days of COVID-19’s global spread. “Cineplex cannot be held in default…when it was prevented from conducting its normal day-to-day operations by government mandate,” said Justice Barbara Conway of the Ontario Superior Court of Justice in her ruling on Tuesday. Cineworld, which operates the Regal cinema chain in the U.S., said it would appeal the decision and “does not expect damages to be payable whilst any appeal is ongoing.” It reported about $450 million in cash holdings as of June and previously said it expected “no material liability” to arise from the Cineplex lawsuit. The U.K.-based company warned earlier this year there was doubt about its viability as a business after it posted a $3 billion loss for 2020 because of the pandemic’s impact. Cineplex had sought US$2.2 billion in damages from Cineworld for backing out of the acquisition.

A bankruptcy judge declined to boot a Manhattan skyscraper backed by Chinese conglomerate HNA Group Co. out of chapter 11, ruling the building owner had legitimate reasons to fear a forced sale, WSJ Pro Bankruptcy reported. Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., ruled that 245 Park Avenue owner PWM Property Management LLC could remain under court protection, deciding against its business partner SL Green Realty Corp., the skyscraper’s property manager, which argued the chapter 11 case was filed in bad faith. PWM filed for bankruptcy in October, saying it was at imminent risk of losing control of its bank accounts to mortgage lenders. Major League Baseball, a key tenant of 245 Park, is leaving the property next year, and lenders could begin confiscating cash if SL Green didn’t find a replacement tenant, according to PWM’s court papers. SL Green argued the chapter 11 case was filed to give PWM an unfair advantage in a two-party dispute that should be handled through litigation, rather than bankruptcy. Judge Walrath disagreed, saying that PWM was in financial distress and filed bankruptcy ahead of a possible “cascade” of negative consequences. “You don’t have to wait until the terrible events happen to file a bankruptcy proceeding,” the judge said in a bench ruling Monday.

Brooklyn property developer Yoel Goldman’s All Year Holdings Ltd. filed for bankruptcy Tuesday to protect itself from potential litigation in the U.S. and Israel while continuing negotiations with creditors over $1.56 billion in debt, WSJ Pro Bankruptcy reported. All Year has been in restructuring talks with bondholders since April and looking for investors to either recapitalize or outright buy its property business, according to papers filed in the U.S. Bankruptcy Court in Manhattan. Chief restructuring officer Assaf Ravid said in the papers that All Year has struggled to meet debt obligations tied to the 1,648 residential and 69 commercial units it owns in the Bushwick, Williamsburg and Bedford-Stuyvesant neighborhoods in Brooklyn. New York City’s housing market crashed during the COVID-19 pandemic but has since rebounded, fueled by residents trading up and out-of-staters moving in. Even so, All Year’s revenues aren’t expected to grow enough to satisfy its roughly $800 million in bonds governed by Israeli law and $760 million in mortgage loans, Mr. Ravid said. All Year already lost a prized luxury property in Brooklyn this year to bankruptcy.

The Boy Scouts of America reached an $800 million settlement with Chubb Ltd.’s Century Indemnity Co. over childhood sexual abuse within the youth group, potentially boosting the funds available for abuse victims under its chapter 11 plan, WSJ Pro Bankruptcy reported. The proposed deal caps Chubb’s exposure under insurance policies it sold the Boy Scouts and is supported by a coalition of law firms representing the bulk of the roughly 82,200 men who filed claims in the youth group’s bankruptcy over past abuse. The settlement with Chubb, if approved in bankruptcy court, would add to the nearly $1.9 billion in compensation the youth group has already pieced together from its own assets, its affiliated local councils, the Church of Jesus Christ of Latter-Day Saints, and another major insurer, Hartford Financial Services Group Inc. “The proposed settlement trust to compensate survivors is now expected to exceed $2.6 billion, and we anticipate additional insurance proceeds and other settlement contributions will be added to this fund in the coming weeks,” the Boy Scouts said yesterday. The youth group is under intense pressure to win the backing of abuse survivors for its bankruptcy plan, which would lift the Boy Scouts out of court protection and resolve its financial liability related to decades of failures to protect children from predators. The Boy Scouts, which filed bankruptcy last year over a growing wave of lawsuits from abuse survivors, has apologized and said the chapter 11 plan will provide equitable compensation and preserve the organization’s mission.

The U.S. Supreme Court yesterday declined to hear a bid by Johnson & Johnson to throw out a lawsuit brought by the state of Mississippi over allegations that the company failed to inform residents that its talc-based products increased the risks of developing ovarian cancer, Reuters reported. The justices left in place an April ruling by the Mississippi Supreme Court that let the lawsuit move forward. In the case being pursued by Mississippi Attorney General Lynn Fitch, the state argues that J&J should have included a warning on its label for baby powder and other talc products about the risk of ovarian cancer. The U.S. Food and Drug Administration said in 2014 that no such label was required and the company has said that decision preempts state lawsuits like Mississippi's. In October, J&J put into bankruptcy tens of thousands of legal claims alleging its talc-based products caused cancer, offloading the potential liabilities into a newly created subsidiary. J&J said that the talc cases would be halted while the new entity saddled with J&J's talc liabilities navigates bankruptcy proceedings. Mississippi disagreed, telling the justices not to condone the company's "effort for further delay."

USA Gymnastics, U.S. Olympic & Paralympic Committee and their insurers have agreed to fund a $380 million settlement with victims of longtime national team physician Larry Nassar, drawing to a close a five-year legal battle that has upended American Olympic sports governance, the Wall Street Journal reported. The sum is among the largest ever recorded for victims of sex abuse and includes hundreds of athletes who were assaulted over three decades. The decision by the final holdout insurer, TIG Insurance Company, to pay a substantial share of the settlement was confirmed Monday in a hearing in bankruptcy court in Indianapolis. The settlement also includes a direct contribution from the USOPC of around $34 million and a $6 million loan from the USOPC to USA Gymnastics to contribute, as well. The settlement will include claims from Olympic gold medalists such as Simone Biles, Aly Raisman and McKayla Maroney, who were treated by Nassar during his time as the U.S. women’s squad doctor. It also includes gymnasts competing for local clubs who sought treatment from Nassar on the strength of his national reputation, and a handful of victims of abusive coaches who had been pursuing claims against the sport’s governing bodies.