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A federal judge said that appeals of a $4.5 billion bankruptcy settlement shielding Purdue Pharma LP’s family owners from civil opioid lawsuits would hinge on whether the agreement is permitted under bankruptcy law and the U.S. Constitution, WSJ Pro Bankruptcy reported. “There’s never been a case like this before,” Judge Colleen McMahon of the U.S. District Court in Manhattan said during a Tuesday hearing over pending appeals arising from Purdue’s chapter 11 proceedings. The Justice Department’s bankruptcy watchdog and a handful of state attorneys general are appealing the drugmaker’s chapter 11 plan and its settlement with members of the Sackler family. Judge McMahon said yesterday that she intends to rule this week on the government authorities’ request to pause enactment of the Sackler settlement and Purdue’s broader reorganization plan, pending the resolution of legal challenges arising out of the bankruptcy. She said that the bankruptcy presents a unique set of facts compared with earlier cases reviewed by the U.S. Court of Appeals for the Second Circuit dealing with the type of legal releases the Sacklers will be provided under the settlement. The U.S. Trustee, the Justice Department unit monitoring bankruptcy cases, and authorities from states including California, Connecticut and Washington have raised concerns about a doctrine called equitable mootness, which they argue could defeat their challenge before higher courts get a chance to consider the legality of the Purdue settlement.

A New York judge said that she will likely issue an order pausing the implementation of Purdue Pharma’s reorganization plan to allow the U.S. Department of Justice's bankruptcy watchdog and a handful of states time to appeal the deal, Reuters reported. U.S. District Judge Colleen McMahon in Manhattan issued a temporary restraining order on Sunday, putting the plan and underlying opioid litigation settlement on hold until Tuesday afternoon, when she will hear arguments on a motion for a longer-term stay. The OxyContin maker secured bankruptcy court approval of its plan and settlement in September, with support from around 40 states and a wide range of municipalities, Native American tribes, hospitals, and personal injury claimants, among others. The deal includes legal protections for the members of the Sackler family that owned Purdue, who are contributing approximately $4.5 billion to the settlement, against opioid-related civil lawsuits in the future. Court documents show that overall approximately $5.75 billion will be placed into trusts that will funnel money to opioid abatement programs and personal injury claimants. DOJ's bankruptcy watchdog, the U.S. Trustee, and a handful of states have appealed the September order, specifically taking issue with the protections for the Sacklers.

A bankruptcy trustee alleged that Ron Burkle’s Yucaipa Cos. transferred nearly $380 million to pension funds and other private-equity investors to avoid looming liabilities tied to its former portfolio company, car hauler Allied Systems Holdings Inc., WSJ Pro Bankruptcy reported. Wednesday’s lawsuit in the U.S. Bankruptcy Court in Wilmington, Del., continues years of disputes between Allied’s creditors and Yucaipa, which allegedly drained money from two investment funds that faced “massive liabilities” stemming from the transport firm’s chapter 11 case. A bankruptcy judge issued a $132 million judgment against the Yucaipa funds in June after finding they failed to make a promised capital contribution to Allied, ensuring its 2012 bankruptcy. Yucaipa distributed $380 million to pension systems and other investors, and now claims the investment funds lack the cash to pay the judgment against them, according to Wednesday’s complaint. The trustee is seeking a court order to unwind the distributions made to backers including California Public Employees’ Retirement System and other public and private pensions, along with Yucaipa itself.

A real estate investment firm that financed the overhaul of a major bus station in northern Manhattan sued the Port Authority of New York and New Jersey, accusing the public agency of upending the planned bankruptcy sale of a retail leasehold and wiping out a $72 million loan from foreign investors, WSJ Pro Bankruptcy reported. New York City Regional Center LLC is seeking to recoup its losses through the lawsuit filed Monday against the Port Authority, which detailed problems with a chapter 11 sale for the retail leasehold at the George Washington Bridge Bus Station in Washington Heights. Funding to redevelop the bus station came through the EB-5 Immigrant investor program, which provides green cards to foreigners who invest $500,000 in certain qualified U.S. businesses. The development consortium, George Washington Bridge Bus Station Development Venture LLC, filed for chapter 11 in October 2019 amid cost overruns at the bus station overhaul and a dispute with contractor Tutor Perini Corp. Although the COVID-19 pandemic prolonged the bankruptcy, the developer struck a deal worth $100 million earlier this year with Monarch Alternative Capital LP, which agreed to assume the $72 million in debt funded through the EB-5 program. But Monarch backed out after the Port Authority, which owns the bus station, demanded that the buyer assume all outstanding liabilities under the ground lease and put $17 million into escrow for other problems at the property. Among the issues the Port identified were elevators that it said weren’t in compliance with fire and safety regulations, an allegation the developer said was false and not substantiated by an engineering firm it hired to check the elevators. The collapse of Monarch’s deal forced the developer to “hastily” enter into an alternative transaction with JMB Capital Partners LLC, which had been funding the bankruptcy case, Monday’s lawsuit said. JMB agreed to waive the chapter 11 loan and provide funding to cover additional administrative costs, according to the complaint.After the sale to JMB was approved, there was no money left to pay off the New York City Regional Center loan, court records show.

The U.S. Supreme Court yesterday cleared the way for New York to collect a $200 million surcharge imposed on opioid manufacturers and distributors to defray the state’s costs arising from the deadly epidemic involving the powerful painkilling drugs, Reuters reported. The justices declined to hear an appeal by two trade groups representing drug distributors and generic drug makers and a unit of British-based pharmaceutical company Mallinckrodt Plc of a lower court’s decision upholding the surcharge. The law’s challengers included the Association for Accessible Medicines, whose members include drugmakers Teva Pharmaceutical Industries Plc and Mallinckrodt, and the Healthcare Distribution Alliance, which represents wholesale distributors. The alliance’s members include the three largest opioid distributors in the United States, McKesson Corp, AmerisourceBergen Corp and Cardinal Health. They proposed in July paying $21 billion to resolve lawsuits accusing them of fueling the epidemic. Mallinckrodt filed for bankruptcy protection in 2020 and has been seeking to finalize a similar, $1.7 billion settlement. The payments to New York were owed under the Opioid Stewardship Act, which Democratic former Governor Andrew Cuomo signed into law in 2018 to address the costs the epidemic imposed on the state.

More than 13 years after Lehman Brothers filed for bankruptcy, the fight for the last scraps of its carcass is still going on, Bloomberg News reported. Deutsche Bank AG is leading a last-ditch legal bid to squeeze more from a bet it made on obscure notes issued by Lehman in the years before the U.S. bank’s collapse. The German lender is appealing a decision made by a British court last year, hoping to gain more from its holding of “enhanced capital advantaged preferred securities” or ECAPS, a series of subordinated notes Lehman issued via one of its U.K. subsidiaries. The case started on Monday at the Court of Appeal in London, and the hearing is scheduled to last until the end of the week. A ruling in Deutsche Bank’s favor could see the payout on the ECAPS rise, boosting the returns of other holders, which, according to public documents and a person familiar with the matter, include Barclays Plc, Farallon Capital Management and CarVal Investors. If all goes well for the holders it’s possible they could receive a windfall of 500 million pounds ($678 million) on notes that were deemed worthless and given away for next to nothing in the aftermath of Lehman’s bankruptcy. That said, the case isn’t without its risks, and it’s possible that holders could be cut out of the money altogether. Another Lehman entity is also appealing, potentially diverting money away from ECAPS holders, according to separate court documents. 

Beleaguered Italian ferry operator Moby SpA dropped its request for an order blocking Morgan Stanley from trading in the company’s debt or interfering in its restructuring, Bloomberg News reported. Moby told a federal court in New York late Sunday that it was withdrawing its application for a temporary restraining order against the bank, which it accused in a Sept. 27 lawsuit of participating in a secret plan to foil its restructuring in Italy and seize control from other creditors. The company, which operates ferries between the Italian mainland and islands like Sardinia, said it would now be seeking Italian court permission to pursue its claims through a chapter 15 U.S. bankruptcy filing. Morgan Stanley on Friday filed court papers deriding the U.S. lawsuit as a meritless attempt to dictate the outcome of Moby’s Italian restructuring proceedings. The bank said Moby failed to show that Morgan Stanley interfered in Moby’s relationship with its creditors or that it had done anything wrong in purchasing the company’s bonds.

A New York federal judge put an end to a long-running legal battle waged by a bankruptcy trustee for Millennium Health LLC’s lenders against banks that arranged a nearly $1.8 billion loan for the drug-testing business before its bankruptcy, WSJ Pro Bankruptcy reported. Marc Kirschner, the bankruptcy trustee appointed in Millennium’s chapter 11 case, had sued banks including JPMorgan Chase & Co. and Citigroup Inc. in 2017. Mr. Kirschner alleged that as underwriters for Millennium, the banks had hidden information about a pending government inquiry when they marketed the loan to investors in 2014. Millennium, one of the largest drug-testing companies in the nation, filed for bankruptcy in 2015 after reaching a $256 million settlement with the Justice Department to resolve the investigation, which concerned allegations whether the company billed federal health programs for unnecessary tests. Investors that bought Millennium’s loans took control of the company in bankruptcy and received the right to sue the loan underwriters. In a ruling on Thursday, Judge Paul Gardephe of the U.S. District Court in New York, upheld a 2020 decision by a magistrate judge dismissing the trustee’s case, concluding that even if the banks knew how damaging the government probe into Millennium would be to the company, under its loan agreements they weren’t obligated to share the information with their lenders. The judge’s ruling addressed an amended version of the lawsuit that Mr. Kirschner filed after the New York court dismissed his original case in May 2020. Judge Gardephe on Tuesday issued a dismissal with prejudice, meaning the lawsuit can’t be refiled. Mr. Kirschner can appeal.

Brazos Electric Power Cooperative Inc. has asked the judge overseeing its bankruptcy to determine that Texas’s electric operator applied the wrong pricing mechanism for electricity used during the state's historic winter storm that left millions without power, Reuters reported. In court papers filed on Wednesday, Brazos asked Chief U.S. Bankruptcy Judge David Jones in Houston to issue a partial summary judgment ruling on the matter, which it first raised in a lawsuit filed in August as part of its bankruptcy against the Electric Reliability Council of Texas Inc. (ERCOT) over a $2 billion bill it received after the February storm. Brazos says that deciding the pricing dispute quickly will narrow the scope of any further trial over the bill and help it develop a reorganization plan. Brazos, the largest and oldest electric co-op in Texas, filed for chapter 11 protection in March after it was hit with the massive bill. The bill for the seven days the storm lasted is nearly three times the co-op’s total power cost from 2020, which was $774 million, according to court papers. For several days during the storm, ERCOT set electricity prices at $9,000 per megawatt hour.