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The U.S. Justice Department told a federal appeals court that Johnson & Johnson's strategy for moving talc injury litigation to chapter 11 violates the regime Congress has authorized for litigating mass torts, MarketWatch.com reported. The U.S. Trustee Program, a Justice Department unit monitoring bankruptcy courts, said in a Thursday filing with the U.S. Court of Appeals for the Third Circuit that Johnson & Johnson's decision to put a newly formed subsidiary into chapter 11 to drive settlements of talc litigation circumvented federal multidistrict litigation procedures which have been prescribed by Congress as the way to deal with mass torts. Johnson & Johnson used an emerging restructuring transaction called a Texas divisive merger to send the talc liability to the subsidiary before it filed bankruptcy, a strategy that will be scrutinized by the appeals court. The U.S. Trustee and talc injury claimants want the Third Circuit to reverse a bankruptcy judge who authorized the Johnson & Johnson talc subsidiary to stay in chapter 11.

A law firm's representation of two insurance companies in an asbestos-coverage case did not disqualify a partner in the firm from opposing the same insurers in the Imerys Talc America bankruptcy case, a federal appeals court held on Thursday, Reuters reported. The U.S. Court of Appeals for the Third Circuit upheld the appointment of Young, Conaway, Stargatt & Taylor’s James Patton as the Future Claimants’ Representative (FCR) in the talc case, over the objections of CNA’s Continental Casualty and AIG’s National Union Fire Insurance Co. The decision resolves a longstanding split in the lower courts about who is qualified to serve as an FCR. The 3rd Circuit agreed with the insurers that the bar should be set high. An FCR “must be more than merely disinterested, and instead be able to fulfill the heightened duties owed by fiduciaries,” Circuit Judge Cheryl Ann Krause wrote. However, the panel also found that the bankruptcy judge had properly applied that standard in appointing Patton. “The decision is important because it is the first by a Court of Appeal to recognize that the fiduciary duty standard … applies to future claimants’ representatives in mass tort cases,” an attorney for the insurers, Tancred Schiavoni of O’Melveny & Myers, wrote in an email. The high standard will “contribute to reform” of the FCR’s role, he said. In a statement, Imerys Talc America said it was pleased with the result, which “maintains stability in the case.” The parties are currently in mediation, after the debtor’s reorganization plan failed to get enough votes for confirmation last fall.

A day after its pilots went on strike, SAS, the Scandinavian airline, said on Tuesday that it had filed for chapter 11 bankruptcy protection in the United States, the latest reverberation in a summer of turmoil for European airlines, the New York Times reported. SAS described the filing, made in the U.S. Bankruptcy Court for the Southern District of New York, as the “next step” in a reorganization that would address the money-losing airline’s financial difficulties, including cost reductions of more than $700 million. It said it was in discussions with potential lenders who could provide $700 million in financing to support operations through the chapter 11 process. It expected to emerge from the process in nine to 12 months. SAS, which is the national airline of Denmark, Norway and Sweden, said that it would continue flying, although on Monday it called the pilots’ strike “devastating” and warned that it could cause the cancellation of half of its flights, affecting about 30,000 passengers daily. On Monday, SAS canceled 51 percent of its flights, according to FlightAware. By midday on Tuesday, nearly 80 percent of its flights had been canceled. SAS’s stock price fell about 15 percent Tuesday, extending a 5 percent decline the day before.

Crypto hedge fund Three Arrows Capital (3AC) is seeking protection from creditors in the United States under chapter 15 of the U.S. Bankruptcy Code, which allows foreign debtors to shield U.S. assets, according to a court filing on Friday, Reuters reported. Singapore-based 3AC is one of the highest-profile investors hit by the sharp sell-off in crypto markets and is being liquidated, Reuters reported on Wednesday. Representatives for 3AC filed a petition in the U.S. Bankruptcy Court for the Southern District of New York on Friday, according to court documents. On Thursday, Singapore's financial regulator had accused embattled the fund of exceeding its assets threshold and providing false information.

Madison Square Boys & Girls Club, which operates six youth centers in New York City, told a bankruptcy judge on Friday that it intends to use its chapter 11 case to mediate more than a hundred sexual abuse claims involving a doctor who volunteered at the centers decades ago, Reuters reported. Madison Square, which filed for chapter 11 protection in New York on Thursday, told U.S. Bankruptcy Judge Sean Lane at a Friday hearing that a bankruptcy mediation is the only way to bring sexual abuse claimants and insurers to the negotiating table before the nonprofit runs out of funds. "We're here to fairly and equitably compensate survivors of what they describe as hideous sexual abuse that took place many years ago at Madison's former premises," attorney Alan Kornberg said. Without bankruptcy protections, the 138-year-old youth organization would likely run out of money in 60 days and be forced to liquidate, Kornberg said. Nearly all of the abuse claims stem from the conduct of a single doctor, Reginald Archibald, who volunteered at Madison from the 1940s to the 1980s. Archibald, who died in 2007, also worked as a pediatric endocrinologist at Rockefeller University Hospital, which revealed Archibald’s history of sexual misconduct in a 2018 investigation.

A controversial $148 million settlement offer in the Diocese of Rochester, along with recent deals of $87.5 million and $121.5 million, respectively, in bankruptcy cases in the Diocese of Camden, N.J., and Archdiocese of Sante Fe, N.M., give glimpses into where mediated negotiations might be heading for the Buffalo Diocese, its parishes and schools and more than 900 people who have filed sex abuse claims with a federal court, the Buffalo News reported. Nearly 2½ years after a flood of Child Victims Act lawsuits prompted the Buffalo Diocese to file for chapter 11 bankruptcy protection, attorneys indicated this week that they are still at least several months from being able to reach a deal compensating abuse victims. “By no means can I say the case is going to settle, but I think we are literally getting into the meat of it, so to speak,” lead diocese bankruptcy attorney Stephen A. Donato told a federal judge this week. Donato said that it will take an “absolute minimum of four to five months” to have a clearer picture of whether mediated negotiations ordered by Chief Judge Carl L. Bucki of the U.S. Bankruptcy Court in the Western District of New York in February will yield results. The diocese has met twice in person to negotiate with a creditors committee that represents abuse victims. “We are still at the initial stages where I think we’re all optimistic that we’ll make further progress,” said Ilan D. Scharf, lead attorney for the creditors committee.

PWM Property Management LLC, the bankrupt owner of 245 Park Ave. in Manhattan, is trying to finalize an agreement in which former business partner SL Green Realty Corp. would serve as lead bidder in the skyscraper's chapter 11 sale process, MarketWatch.com reported. Terms weren't disclosed during the update provided Thursday in the U.S. Bankruptcy Court in Wilmington, Del. But earlier this year Chinese conglomerate HNA Group Co., which is a backer of PWM Property Management, was told in an arbitration proceeding that it must pay SL Green roughly $185 million in a dispute over the real estate. Besides managing the building, SL Green also invested $148 million in the property.

Residential lender First Guaranty Mortgage Corp. filed for bankruptcy, citing worsening conditions in the mortgage market as home sales slow and fewer home borrowers refinance due to rising interest rates and tight housing supply, WSJ Pro Bankruptcy reported. First Guaranty cut 471 jobs, nearly 80% of its workforce, and ceased loan originations ahead of Thursday’s chapter 11 filing. The company turned to chapter 11 as mortgage refinancings slowed nationwide and a series of margin calls on hedging instruments drained its cash, court papers show. First Guaranty is backed by investment firm Pacific Investment Management Co., which has teamed up with Barclays PLC to offer the company roughly $150 million in total financing to carry it through chapter 11. First Guaranty said it is lining up a financing package to carry it through chapter 11 and enable it to fund consumer loans for borrowers in the mortgage pipeline who haven’t yet closed. The bankruptcy stems from “intense pressure on mortgage originations due to the dramatic collapse of the mortgage refinance market and the weakening mortgage purchase market,” First Guaranty said. The average rate on a 30-year, fixed-rate mortgage sits at 5.70%, pushed up from 3.22% at the beginning of the year as the Federal Reserve increases interest rates and pulls back its purchases of mortgage bonds. That has made it the least affordable time to purchase a home since before the financial crisis, according to the Federal Reserve Bank of Atlanta. Rising rates also reduce the number of borrowers who would save on monthly payments by refinancing. The Federal Reserve Bank of New York has said mortgage originations fell 25% in the first quarter compared with the previous year, dragged down by a 40% annual decline in refinancings. In court papers, First Guaranty said it faced a series of margin calls on financial hedges, causing a liquidity crisis in the weeks before the bankruptcy filing. A slowdown in refinancings cut down the company’s mortgage originations this year to a projected annual pace of $5 billion to $6 billion, compared with the $10.6 billion it originated last year, according to a sworn declaration by Chief Executive Aaron Samples.

Enjoy Technology Inc., a retail technology company started by former Apple Inc. retail strategist and chief executive of J.C. Penney Ron Johnson, filed for bankruptcy on Thursday, citing difficulties raising new capital in a difficult fundraising market for tech firms, WSJ Pro Bankruptcy reported. The filing came less than a year after the company went public through a merger with Marquee Raine Acquisition Corp., a special-purpose acquisition company. The transaction helped the company raise net proceeds of $112.6 million, according to court papers. Enjoy said that it has reached an agreement to sell most of its assets to device insurance company Asurion LLC, which has agreed to provide a $55 million loan to fund the company through bankruptcy. Enjoy said it would accept a higher offer and it expects that Asurion’s bid will be sufficient to pay all secured and unsecured creditors in full. Founded in 2014, Enjoy Technology sought to bring high-end retail service into customers’ homes in North America and Europe. The company has over 1,700 employees across the U.S., Canada and the U.K., some of whom hand-deliver iPhones and other tech gadgets on behalf of Apple, AT&T Inc. and others, and use those deliveries to try and sell more of those companies’ products. The company had initial backing from venture-capital firms including Kleiner Perkins and Andreessen Horowitz. This spring, Enjoy began to evaluate strategic alternatives after failing to raise fresh capital to keep the business afloat, court papers show. Since going public last year, the revenue it generated hasn’t been enough to turn a profit because of costs associated with business development and growth, court papers said. The company generated about $25 million in revenue, but reported around $50 million in operating losses in the first quarter of this year, company filings show.

Endo International PLC said Thursday that it has elected not to make a $38 million payment owed to its bondholders as the drug producer contends with declining earnings and thousands of lawsuits alleging it fueled the opioid crisis, WSJ Pro Bankruptcy reported. Endo is continuing discussions with creditors regarding its evaluation of strategic alternatives, the company said, and has entered a 30-day period before its failure to make the payment would constitute an event of default. Endo, which faces about 3,500 lawsuits from state and local governments and healthcare providers, has been warning of the risk of a bankruptcy filing in its regulatory disclosures since last year. While Endo has reached settlements with a handful of state and local governments over opioid liabilities, the vast majority of outstanding lawsuits have not been resolved. The company has denied wrongdoing in connection with its sales of its Opana opioid, which it stopped selling in 2017. In addition to the litigation that Endo faces, the company is also suffering from declining earnings, in part driven by the loss of exclusivity for a key drug, Vasostrict. The company’s debt load amounts to more than $8 billion. On Monday, a group of junior bondholders publicly urged Endo not to file for bankruptcy, saying there are several possible transactions, such as a bond swap, that would enable Endo to restructure its obligations outside of chapter 11. Endo, which is domiciled in Ireland following a 2014 corporate tax inversion and has operations in Malvern, Pa., on Thursday said that its decision to miss the interest payment is not driven by liquidity constraints, as it had approximately $1.4 billion in cash as of March 31.