Attorneys believe as many as 100,000 people are eligible to receive payments for damages they suffered during the devastating California wildfires of recent years. But wildfire victims of previous years must wait for PG&E to exit bankruptcy to get any payout from the utility, the Associated Press reported. And as the 2019 wildfire season takes another toll on Northern California and the utility’s equipment is blamed for new fires, the number of homes destroyed ticks up. More victims are filing claims against the company, potentially reducing the payout all victims and creditors could receive. In its bankruptcy plan, PG&E has pledged to pay $8.4 billion to wildfire victims and an additional $11 billion to compensate insurance companies for their payouts. A competing proposal made by bondholders seeking to gain control of PG&E would pay wildfire victims $13.5 billion. It’s unclear how much the total liabilities for wildfire victims will amount to, and the matter is being litigated.
Insys Therapeutics Inc., the first opioid maker to use bankruptcy to cope with legal trouble stemming from the national addiction crisis, is struggling to wind up its affairs in the face of a wave of protests, WSJ Pro Bankruptcy reported. The manufacturer, which manufactured an under-the-tongue formulation of the powerful painkiller Fentanyl, filed for chapter 11 protection in June after its former top leaders were convicted of racketeering. Insys sold its businesses and is trying to win creditor support and court approval for a chapter 11 plan that spells out how the proceeds will be distributed. Rounding up support for the plan hasn’t been easy for the company, which yesterday pushed off for the second time a key preliminary test of its payout proposal. The chapter 11 plan proposed by Insys would leave a payout of $15 million to $20 million for creditors, and other possible revenue streams, such as royalties from products, according to court papers filed by a court-appointed creditor committee. Government lawyers said public creditors, such as the states and cities, are entitled to at least as much of Insys’s cash as private creditors, including suppliers. Liability releases for Insys are still under discussion, lawyers told Judge Kevin Gross yesterday. Judge Gross has set a Dec. 4 hearing for Insys to deliver a preliminary chapter 11 plan report to tell creditors what they will get, and what they will give up, if the arrangement is confirmed. Read more.
In related news, Insys outlined a deal yesterday to divide its dwindling cash among governments, insurers, hospitals and individuals who accused the company of fueling the U.S. opioid crisis, Reuters reported. The company was largely adopting a plan it had filed in September, which now had the support of numerous groups that initially opposed it, said Brenda Funk, who represents the company, at yesterday’s hearing before a Bankruptcy Judge Kevin Gross in Delaware. The Insys agreement established the company owed various parties a combined $1 billion, well below the billions of dollars that could have been claimed. In addition, the Department of Justice would have a claim of $243 million, along with undetermined claims for forfeiture and restitution. Read more.
The defunct for-profit Globe University has filed for chapter 11 bankruptcy protection, saying it owes many millions of dollars in connection with fraud actions taken against the school by the state of Minnesota, the Minneapolis Star Tribune reported. The petition filed in federal court on Wednesday by the former Woodbury, Minn.-based school comes two weeks after the Minnesota Supreme Court sided with former criminal justice students at Globe and its affiliated Minnesota School of Business (MSB) in ruling that anyone who attended the programs can receive a tuition refund. The filing lists Globe’s assets ranging from $100,000 to $500,000, with debts from $10 million to $50 million. The state’s claims are the largest by far among the creditors, but the U.S. Education Department also has a claim of roughly $850,000 in connection with student loans. The state attorney general’s office sued the schools five years ago, alleging they misled students by suggesting they would be able to work as police and probation officers. The students, among them a large number of veterans using GI Bill benefits, enrolled in the schools’ criminal justice program only to later discover that their degree failed to meet requirements for becoming police and probation officers in Minnesota.
After Hahnemann University Hospital went into bankruptcy and closed this summer, a group of state senators urged the Wolf administration to redistribute the Center City institution’s subsidies for the poor and uninsured to other hospitals that serve North Philadelphia, the Philadelphia Inquirer reported. Moving the Hahnemann money to Einstein, Jefferson, and Temple — the shift sought by Philadelphia’s State Sen. Tina Tartaglione and others to prevent cascading losses at other hospitals as they picked up indigent Hahnemann patients — sounds simple, but there are challenges. Hahnemann’s $51 million in subsidies represented a slice of the $1.15 billion in state and federal Medicaid money paid to Pennsylvania hospitals last year through 37 obscure programs negotiated in Harrisburg to help pay for treating the poor. Philadelphia hospitals’ share was $535 million. The labyrinthine funding system pits hospitals across Pennsylvania against one another and forces them into backroom deals to get the funding they need to keep treating poor patients. And, it forces hospitals in the city, with a 24.5 percent poverty rate, to play politics in Harrisburg to fill the gap left by Philadelphia General Hospital’s closure more than 40 years ago.
California Governor Gavin Newsom (D) wants PG&E Corp. to add state-appointed members to its board as part of the utility giant’s reorganization, Bloomberg News reported. Newsom’s administration pushed for this, along with several other conditions, to be included in PG&E’s restructuring plan during a meeting yesterday with the company and other parties in its bankruptcy case. Newsom also wants a governance structure that would give these board members greater management authority over the utility if it fails to meet certain safety performance standards, the governor’s office said yesterday. The pressure on Newsom to force an overhaul at PG&E has escalated in recent weeks as the company plunged millions into darkness to keep its power lines from igniting wildfires. The company filed for chapter 11 protection in January after its equipment was tied to a series of 2017 and 2018 blazes that left it with $30 billion in estimated liabilities. Earlier this month, Newsom threatened to take over PG&E if the company fails to emerge from bankruptcy by a state-imposed deadline of June 30, 2020, and improves its operations before next year’s wildfire season.
New York ride-hailing business Juno USA LP filed for bankruptcy protection, blaming its demise on minimum wage regulations and mounting lawsuits from drivers, riders and competitors, WSJ Pro Bankruptcy reported. The ride-hailing service, which launched in early 2016 and was acquired by Israeli startup Gett in 2017, had contracted with roughly 50,000 drivers in the New York area, providing nearly 50,000 rides a day at its peak, according to papers filed by Juno’s chief restructuring officer, Melissa Kibler, in the U.S. Bankruptcy Court in Wilmington, Del. The bankruptcy comes shortly after Gett said that it was shuttering Juno while striking a partnership with Lyft Inc. to expand in the U.S. Ride-hailing companies are grappling with efforts by several states to extend employment protections to gig workers. In the face of additional regulation, the ride-hailing industry has been consolidating and pushing back against government measures that could upend their business models. Gett, which bought Juno in a $200 million equity-based deal, said that the company’s demise stemmed from “misguided regulations” in New York City. While the Juno app has been shut down, the company said that it wants to transform itself to offer “business-to-business” transportation services instead of relying on a “business-to-consumer” model. The company said it would develop a chapter 11 plan with Gett that would fund recoveries to creditors while Juno’s operating entities would be liquidated. Gett is providing $4.5 million in bankruptcy loans to finance the process, subject to court approval.
A federal appeals court said General Motors Co is not liable for punitive damages over accidents that occurred after its 2009 bankruptcy and involved vehicles it produced earlier, including vehicles with faulty ignition switches, Reuters reported. The U.S. Court of Appeals for the Second Circuit yesterday said that the automaker did not agree to contractually assume liability for punitive damages as part of its federally-backed chapter 11 reorganization. GM filed for bankruptcy in June 2009, and its best assets were transferred to a new Detroit-based company with the same name. The other assets and many liabilities stayed with “Old GM,” which is also known as Motors Liquidation Co. Yesterday’s 3-0 decision may help GM reduce its ultimate exposure in nationwide litigation over defective ignition switches in several Chevrolet, Pontiac and Saturn models. It is also a defeat for drivers involved in post-bankruptcy accidents, including those who collided with older GM vehicles driven by others, as well as their law firms. The ignition switch defect could cause engine stalls and keep airbags from deploying, and has been linked to 124 deaths.
After an autumn marked by mass blackouts and wildfires, Pacific Gas & Electric is racing to craft a plan to escape bankruptcy, the New York Times reported. That plan needs to satisfy fire victims and state officials who are threatening to take over PG&E, California’s largest utility, unless executives improve its safety record. If PG&E doesn’t reach an agreement with victims and other creditors by early next year, the utility might not be able to participate in a new state wildfire fund. A federal bankruptcy judge could also strip control from its management and board, or allow it to be broken up, with the pieces sold to the highest bidder. These tensions surfaced in a court hearing yesterday, in which PG&E asked a bankruptcy judge to limit its liability for wildfires, and at a legislative hearing that featured the company’s chief executive on Monday in Sacramento. Another big problem for PG&E: California’s fire season isn’t over yet. A dangerous combination of high winds and dry conditions is expected as early as today, and PG&E has said that it could cut power to up to 150,000 customers. That works out to about 400,000 people — when accounting for shared addresses — in 16 counties across Northern California, including wine country and the Sierra foothills. Read more.
In related news, victims of wildfires linked to PG&E Corp.’s equipment said property insurers with billions of dollars on the line aren’t at the negotiating table, lowering the chances of a comprehensive deal to end the bankruptcy, the Wall Street Journal reported. “They took the cash. There’s no cash left,” fire victim lawyer Robert Julian said yesterday at a hearing in the U.S. Bankruptcy Court in San Francisco, referring to a proposed deal that provides $11 billion cash to insurers that paid off fire damage claims. Insurers have yet to collect the money, because the proposed settlement hasn’t been approved by the judge overseeing PG&E’s bankruptcy. After repeated delays, it is now slated for review in early December. PG&E filed for chapter 11 protection in January, trying to tackle an estimated $30 billion in damage claims from years of wildfires linked to its equipment. The utility filed a chapter 11 exit plan that disappointed victims and has been caught up in court fights over how much must be set aside for fire claims, with the insurance settlement a particular sore spot. While the legal wrangling continues, PG&E, the fire victims and other creditors are involved in a mediation that could ease a path out of bankruptcy. That mediation doesn’t include the insurers, and their requirement for a cash payment is limiting PG&E’s ability to negotiate, according to Julian. Matthew Feldman, a lawyer for the insurers, declined to discuss the mediation at yesterday’s hearing. The group he represents includes both insurers that paid claims directly and investment funds such as the Baupost Group LLC that bought insurance claims in the secondary market. Insurance creditors want Judge Montali to approve the $11 billion settlement Dec. 4 and allow a lawsuit filed by fire victims challenging the deal terms to take its course. Read more. (Subscription required.)
