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The chapter 7 trustee overseeing the dissolution of New York real estate law firm Kossoff PLLC asked a bankruptcy judge Tuesday to hold its founder in civil contempt and order him incarcerated if he continues defying court orders to cooperate, Reuters reported. The trustee, Al Togut, also asked the judge in a separate motion Tuesday to compel the Manhattan district attorney's office to turn over certain grand jury materials relating to its investigation of firm founder Mitchell Kossoff. The filings underline Togut's mounting frustrations managing the estate of the Kossoff firm, which was forced into bankruptcy in May after creditors claimed it misappropriated more than $8 million from its escrow accounts. Kossoff's refusal to comply with multiple court orders to produce records has "dramatically increased the administrative expense of this estate, which prejudices the interests of the victims of Kossoff’s fraudulent activity," Togut wrote to U.S. Bankruptcy Judge David Jones.

Mallinckrodt PLC has begun defending its chapter 11 exit plan, a proposal that would reduce its debt and settle litigation the company faces over its production of opioids for roughly $1.72 billion, WSJ Pro Bankruptcy reported. A trial addressing the drugmaker’s chapter 11 reorganization plan opened Monday in the U.S. Bankruptcy Court in Wilmington, Del. Mallinckrodt sought court protection early last year with the framework of a deal already in hand to resolve its opioid liabilities. The trial could last several weeks. Financial advisers hired by Mallinckrodt were questioned yesterday about business projections and other metrics underpinning the restructuring plan. The value of the company once it leaves chapter 11 is projected to be between about $5.2 billion and $5.7 billion, court papers say. Dublin-based Mallinckrodt is among a handful of drugmakers that turned to bankruptcy recently to resolve a deluge of lawsuits over the opioid epidemic. As with other drugmakers that have sought chapter 11, settlement funds would be used to combat opioid addiction, which increased during the COVID-19 pandemic. Mallinckrodt is also seeking to settle liability over pricing for its H.P. Acthar Gel drug, which costs roughly $38,000 a vial and is used treat infantile spasms, multiple sclerosis and other conditions.

PG&E Corp said yesterday that it had received a subpoena from the U.S. attorney's office seeking documents from the Californian utility related to the Dixie Fire, and expects to take a loss of $1.15 billion from the blaze this year, Reuters reported. The company, in a regulatory filing, said it received the subpoena on Oct.7. The so-called Dixie, ranked as the second-largest California wildfire on record, scorched through Northern California communities and forests in early August, forcing thousands to flee from their homes and prompted precautionary power shutdowns. The cause of the Dixie fire remains under investigation. PG&E had said the blaze may have started when a tree fell onto one of the utility's power cables. The company emerged from bankruptcy last year. It had sought protection from creditors after wildfires sparked by its equipment in 2017 and 2018 drove the utility's potential liabilities into tens of billions of dollars. The company had said in July it would bury 10,000 miles of power lines in high-risk fire zones as a safety measure after its equipment caused multiple destructive wildfires over several years.

A unit of French advertising company Publicis Groupe SA on Friday lost a bid to dismiss a lawsuit by Massachusetts' attorney general claiming it helped OxyContin maker Purdue Pharma LP fuel the U.S. opioid epidemic, Reuters reported. Publicis Health had called Attorney General Maura Healey's lawsuit an unprecedented attempt to sue an advertising agency over a manufacturer's marketing of its products. It called her allegations conclusory and said she mischaracterized documents. But Suffolk County Superior Court Judge Brian Davis said Healey brought "non-speculative" claims under the state's public nuisance law and consumer protection statute that could move forward. He pointed to allegations in Healey's complaint, filed in May, that he said showed Publicis "played an integral part in developing marketing strategies" to boost opioid sales from 2010 to 2019. Davis said those marketing campaigns were designed to get doctors "to use more OxyContin, prescribe higher doses and prescribe it for longer periods of time for patients." Healey said she was pleased Davis "rejected Publicis' attempt to skirt responsibility for its marketing campaigns."

Credit Suisse Group AG and Community Health Systems Inc. have been sued over the 2020 bankruptcy of Quorum Health Corp., facing allegations that their actions burdened the hospital operator with more than $1.2 billion in debt, WSJ Pro Bankruptcy reported. Publicly traded Community Health Systems founded Quorum in 2015 and spun it off a year later. Credit Suisse served as an adviser during the spinoff. When Quorum filed for bankruptcy in April 2020 with roughly $1.3 billion in debt, it said it was financially and operationally troubled from the start. The lawsuit was filed on Monday in the U.S. Bankruptcy Court in Wilmington, Del., by litigation trustee Daniel Golden and by Wilmington Savings Fund Society, which represents unsecured bondholders who are among the creditors who have received less than 10 cents on the dollar of what they are owed. During bankruptcies, a litigation trustee often files and manages lawsuits on creditors’ behalf. According to the lawsuit, Community Health caused Quorum to take on more than $1.2 billion in debt, with proceeds paid to Community Health as a dividend. “No reasonable fiduciary acting in QHC’s best interest would have agreed to burden QHC with that amount of debt, or to pay the proceeds to CHS as a dividend without receiving any value in return,” the lawsuit said. Community Health tapped its investment banker, Credit Suisse, to “nominally” serve as Quorum’s investment banker during the spinoff, according to the lawsuit.

Luckin Coffee Inc. reached a $175 million settlement of shareholder class-action claims that the Chinese rival to Starbucks fraudulently inflated its share price by falsifying revenue, Reuters reported. Lawyers for the shareholders called the all-cash settlement, filed on Monday night, an “excellent result,” citing Luckin’s liquidation proceeding in the Cayman Islands and its related filing for protection under the U.S. Bankruptcy Code. The accord also covers Luckin officials, as well as underwriters of the Xiamen, China-based company’s $645 million initial public offering in 2019 and a later offering of American depositary shares. U.S. District Judge John Cronan in Manhattan approved the preliminary settlement on Tuesday and scheduled a Jan. 31, 2022, hearing to consider final approval. The settlement also requires approval by a Cayman Islands court. Founded in 2017, Luckin ended March with about 5,000 stores. Shareholders sued Luckin in February 2020, two weeks after short-seller Muddy Waters Research accused it of inflating revenue. Two months later, Luckin’s share price sank 81% after the company said an internal probe found that its chief operating officer and other staff fabricated about $310 million of sales in 2019, or about 40% of annual sales projected by analysts. Luckin agreed last December to pay a $180 million fine to settle U.S. Securities and Exchange Commission accounting fraud civil charges.

A bankruptcy judge refused an initial bid to pause talc litigation against Johnson & Johnson, setting the stage for a November hearing that will likely scrutinize the corporate maneuvering the company undertook to try to settle thousands of personal-injury lawsuits through a subsidiary’s chapter 11, WSJ Pro Bankruptcy reported. Judge J. Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C., on Friday refused to extend to J&J a temporary restraining order that would have halted lawsuits against the consumer-goods giant during the two-week period before next month’s hearing. Instead, the personal-injury lawsuits will only be paused against the newly formed J&J subsidiary that was put into chapter 11 earlier this month and its corporate predecessor, the judge said during a hearing. The ruling effectively limits, at least until early November, the scope of the J&J subsidiary’s bankruptcy stay, a powerful legal tool that immediately halts all lawsuits against a company when it files chapter 11. The J&J subsidiary, called LTL Management LLC, is arguing that its stay should also include its parent company—even though it is not in chapter 11 — because they both have coverage rights under shared insurance policies and because the two corporate entities, though distinct, are “inherently intertwined” by the same talc-injury claims.

USA Gymnastics cleared another hurdle in its bankruptcy plan that would pay $400 million to sexual abuse survivors of team doctor Larry Nassar and insurance companies, Courthouse News reported. Bankruptcy Judge Robyn Moberly approved the organization's disclosure statement yesterday in the third hearing this month on the matter, after all objections to the plan or the method of approval were either resolved or held to be brought forth at a later date. “Based on the fact that there are no objections at this point to the disclosure statement or the proposed procedures for solicitation, we will approve both of them as motions,” Judge Moberly said. The proposed plan is a joint effort between USA Gymnastics and a court-appointed committee that represents sexual abuse survivors and aims to settle current and future claims related to Nassar and others connected to the organization who abused young girls. Under the plan, the more than 500 abuse survivors would receive payments from the settlement fund, and a reserve fund would be created to set aside money for future claims that surface over the next five years. The $400 million figure is far greater than the previously rejected offer of $215 million and less than the $500 million Nassar’s former employer, Michigan State University, agreed to pay survivors. Besides monetary compensation, the proposed plan also offers a pathway for USA Gymnastics to make itself a safer organization going forward. This includes a new "safe sport policy" to establish safety standards and accountability for its gymnastics clubs. The plan also calls for a streamlined process for athletes to report violations of the organization's policies, which includes an online portal where reports of misconduct can be filed. Now that the disclosure statement has been approved, creditors of USA Gymnastics will begin voting on the plan, with ballots due by Nov. 29. A report on the vote would be issued on Dec. 2, with final confirmation hearings set for Dec. 13 and 14.

A federal bankruptcy judge has again blocked 36 people who say they were sexually abused from pressing ahead with Child Victims Act lawsuits against Catholic parishes and schools, the Buffalo (N.Y.) News reported. Chief Judge Carl L. Bucki of the U.S. Bankruptcy Court in the Western District said in a written ruling this week that allowing the state litigation to move forward “would become an inherent distraction that promises to complicate negotiations” among the parties involved in the Diocese of Buffalo bankruptcy reorganization. Judge Bucki agreed with the diocese’s request to extend an injunction prohibiting litigation by 36 plaintiffs against parishes and schools until next August. He also ruled that the plaintiffs were free to continue litigating against individuals who may have abused. The diocese’s lawyers had argued that if any CVA cases against parishes and schools advanced in the state courts, it would inevitably involve the diocese in costly litigation and drain assets that otherwise would be used in settling with childhood sex abuse victims. Judge Bucki acknowledged that the diocese’s bankruptcy case was “extremely complicated,” with more than 900 people seeking damages for abuse claims and continuing litigation within the proceedings over the scope of insurance coverage for more than 5,000 policies issued by at least 70 carriers.