%1

When investors took over prison healthcare provider Corizon in December 2021, it was on the brink of a bankruptcy filing to weather the loss of key contracts, hundreds of prisoner lawsuits and mounting debts to hospitals and doctors, WSJ Pro Bankruptcy reported. The company, among the nation’s largest correctional health companies, is now nearing a chapter 11 restructuring that would settle those claims for less than its creditors have demanded—without ever appearing in bankruptcy court itself. Its owners could retain control of the business, cleansed of old debts and lawsuits, as it rebuilds its market share under its new brand name, YesCare. YesCare has put a new spin on the Two-Step. The company split itself in May 2022 into an operating business holding its government contracts and a Texas subsidiary called Tehum Care Services that was made responsible for its unpaid bills and legal liabilities. Tehum then filed for chapter 11 in February, carrying into bankruptcy court the debts and liabilities to prisoners, healthcare providers, insurance companies and others accumulated under the company’s prior ownership. In bankruptcy, Tehum has powerful tools at its disposal to resolve creditors’ claims against it—and against its rebranded affiliate YesCare.

Bankrupt drugmaker Mallinckrodt is in talks with major investors about selling some or all of its business units, which could lead to its exit from the opioid business, according to a WSJ Pro Bankruptcy report. Some investors, poised to take control through the company's ongoing bankruptcy proceedings, are suggesting Mallinckrodt break up its business units. The Ireland-based company filed for its second bankruptcy in the United States last month, with a restructuring plan that would cut $1 billion from what it owes to victims of the U.S. opioid crisis. Mallinckrodt, which makes both branded and generic drugs, had first filed for bankruptcy in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids and disputes over its drug pricing. As part of its plan to emerge from bankruptcy in June 2022, the company, which denied wrongdoing, agreed to pay $1.7 billion to settle about 3,000 lawsuits alleging it used deceptive marketing tactics to boost opioid sales. Mallinckrodt also disclosed in filings with the Securities and Exchange Commission last month that it recently received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia, seeking information about its reporting of suspicious opioid orders to the U.S. Drug Enforcement Administration.

For months, John Jay Ray III, the corporate turnaround expert who was appointed to oversee the bankruptcy of the FTX crypto exchange, has attacked the company’s founder, Sam Bankman-Fried, accusing him of “old-fashioned embezzlement.” Now, Mr. Ray has a new target: Mr. Bankman-Fried’s parents, the New York Times reported. FTX yesterday filed a lawsuit in federal court in Delaware accusing Joe Bankman and Barbara Fried, longtime Stanford law professors, of using their “access and influence within the FTX enterprise to enrich themselves.” The lawsuit seeks to claw back millions of dollars the couple received from their son. In the complaint, FTX’s lawyers said that Mr. Bankman and Ms. Fried got a $10 million cash gift from Mr. Bankman-Fried, as well as a $16.4 million home in the Bahamas, where FTX was based, that was purchased by the exchange. The suit also claims that Mr. Bankman helped cover up complaints by a former lawyer for his son’s business, and that Ms. Fried coached Mr. Bankman-Fried and another FTX executive to evade disclosure requirements for political donations.

A federal bankruptcy court hearing on Endo International's proposal to sell the pharmaceutical company to its senior lenders, which are owed nearly $6 billion, will not be held until October, the Philadelphia Business Journal reported. The hearing was initially slated to take place in late August. It was rescheduled for last week, before being rescheduled again. The new hearing date is Oct. 19 at 11 a.m. in the U.S. Bankruptcy Court for the Southern District of New York. Objections must be filed by Oct. 12. No reason for the delay was provided in court documents. Endo is domiciled in Ireland and has its U.S. headquarters in Malvern, Pa.. The company filed for chapter 11 bankruptcy protection last August while dealing with thousands of opioid-related lawsuits and with mountings debts of about $8 billion. The company — which now focuses on specialty pharmaceuticals, sterile injectable drugs and generic medicines — marketed generic pain medicines containing opioids up until late 2016. Its proposed deal to emerge from bankruptcy includes a provision under which the senior lenders agree to fund the almost $600 million in opioid settlements that Endo has agreed to pay to U.S. states and people affected by opioid addiction. The senior lenders have also agreed to establish a trust for future opioid claimants. The transaction has drawn objections from four federal agencies — the Department of Justice, the Internal Revenue Service, the Department of Health and Human Services and the U.S. Department of Veterans Affairs. The government said that the deal violates U.S. bankruptcy law because it provides payments to some of the company's creditors, including the opioid claimants, while federal government agencies and other creditors "have been singled out to recover nothing." In its objection, the government agencies called the proposed sale "an abuse of the bankruptcy system that is plainly unlawful and should be rejected by this court." Additionally, the court filing notes, the Department of Justice is pursuing billions of dollars in claims against Endo tied to alleged tax debts, overpayments for the company's medications by the government, and its ongoing criminal investigation into the company's opioid marketing practices.

Chinese developer Sunac China Holdings has filed for chapter 15 protection from creditors in a U.S. bankruptcy court, court documents showed, Reuters reported. Creditors of Sunac China Holdings approved its $9 billion offshore debt restructuring plan on Monday, marking the first approval of such debt overhaul by a major Chinese property developer. Sunac is among a string of Chinese property developers that have defaulted on their offshore debt payment obligations since the sector was hit by a liquidity crisis in 2021, roiling global markets.

SVB Financial Group, the former parent of Silicon Valley Bank, is closing in on a deal to sell its venture-capital and credit-investment arm out of bankruptcy, the Wall Street Journal reported. Two front-runners are vying in the bidding process for SVB Capital: a duo of Anthony Scaramucci’s SkyBridge Capital and Atlas Merchant Capital, and San Francisco private-equity firm Vector Capital. A court decision on a winner is expected in the next few weeks. The business could fetch anywhere between $250 million and $500 million, the people said, cautioning that a transaction still isn’t guaranteed and would need to be reviewed by the creditors’ committee too. Bankers at Centerview Partners have been advising the parent company on the process. In March, Silicon Valley Bank failed and was taken over by regulators, kicking off a mini-banking crisis that later took down Signature Bank and First Republic. SVB Financial Group filed for chapter 11 protection in New York bankruptcy court, paving the way for a sale of its assets after the technology-focused lender at the core of its business was seized by regulators.

A retailer in the Fashion District has shuttered and filed for bankruptcy protection as the Center City mall and its tenants struggle to recover from the effects of the pandemic, the Philadelphia Business Journal reported. RBJ Philly LLC, which operates the Beef Jerky Experience store, filed for chapter 7 bankruptcy protection in U.S. Bankruptcy Court for the Eastern District of Pennsylvania on Aug. 30 and closed its doors the same day. Beef Jerky Experience set up shop on the mall's concourse level shortly after the Fashion District opened in late 2019. Brad Sadek of Sadek Law Offices, the attorney representing franchisee owners Randy Giandonato and Richard Kromer in the chapter 7 case, said that the duo chose to file for bankruptcy because reduced foot traffic in the Fashion District and the “rapid pace” of store closures have resulted in low visitation levels over the past four years. Handicapped by COVID-19 shutdowns and the accelerated rise of e-commerce, the Fashion District has not lived up to the expectations co-owners Macerich and PREIT had when it debuted on East Market Street in September 2019 following a $420 million redevelopment of the former Gallery mall. Prior to its opening, PREIT CEO Joe Coradino told the Business Journal he believed the retail complex would be a "resounding success" and would "transform" the struggling company. Instead, the Fashion District was derailed when COVID-19 hit the U.S. six months later. PREIT gave up most of its involvement after going through chapter 11 bankruptcy in late 2020, and Macerich has substantially controlled the Fashion District’s operations and decisions since then.

Just when you think the debate about the legal, ethical or practical implications surrounding third-party releases in mass tort chapter 11 cases cannot get any more convoluted, another real-world example rears its ugly head and makes our brains hurt again, according to a new commentary from Tom Salerno of Sintson LLP (Phoenix). Truth is indeed stranger than fiction! In last Monday’s Law360, it was reported that LTL Management LLC (LTL), the Johnson & Johnson (J&J) subsidiary into which its talcum powder claims were deposited, is suing a doctor who published a report linking talcum powder (specifically asbestos in talcum powder) to personal injuries (mesothelioma). Of course, we are all aware that prior to this announcement, J&J and LTL had been dealing with thousands of claims that talcum powder produced by J&J caused cancer (the “Cancer Talcum Claims”). It is unclear how widespread the victim class is for this new aspect of poisonous talcum powder (the “Asbestos Talcum Claims”), but let’s posit for a moment that this becomes a large class of victims. To set the stage, we are all aware that LTL has been bounced out of bankruptcy not once, but twice by the Third Circuit based on essentially lack of good faith and the unavailability of third-party releases for mass tort trust settlement devices to deal with the Cancer Talcum Claims. Let’s call this the “Mass Tort Settlement Protocol,” which funnels victims’ claims into a trust funded by the debtors and third parties (such as insurance companies and, in the Purdue Pharma case, Sackler family members and controlled entities), and which provides releases to those third parties who fund the trust, exchanging civil liability for payments to the trust. Not surprisingly, third-party releases are an integral and essential part of the Mass Tort Settlement Protocol. No release, no funding. Read the full commentary.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Salerno will be one of the featured panelists on the "SCOTUS Crossfire: Will Purdue Be the Last Mass Tort Bankruptcy?" abiLIVE webinar on Oct. 4. See the full panel of experts and register today for FREE by clicking here.

Yellow Corp. received U.S. bankruptcy court approval on Friday to sell its vehicle fleet by October, while continuing to market its real estate assets, which have already received a $1.525 billion bid, Reuters reported. The freight shipping company, which went bankrupt in August after a protracted labor dispute, owns approximately 12,000 trucks and 35,000 trailers, according to its bankruptcy court filings. Yellow has set an Oct. 13 bid deadline for those assets. Hundreds of buyers have already expressed interest and signed non-disclosure agreements, and some have begun conducting on-site inspections, Yellow attorney Allyson Smith told U.S. Bankruptcy Judge Craig Goldblatt at a court hearing in Wilmington, Delaware. "The sale process is well underway at this point," Smith said. Yellow intends to conduct an auction for the vehicles by Oct 18 and seek court approval for the vehicle sale on Oct. 27.

Lordstown Motor Company has extended the deadline for bids to purchase its assets in the bankruptcy court, wfmj.com reported. The company quietly filed the motion on September 12th, extending the deadline for others to make bids on its assets from September 8th until September 18th, and extending other deadlines in their bidding procedures by between one and two weeks. The filing sets the new date for closing of all asset sales at October 31st, a week later than the original closing date of October 24th. LMC began the process of selling its assets after declaring chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware back in June.