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The U.S. Department of Justice's bankruptcy watchdog objected on Monday to the Boy Scouts of America's proposed reorganization plan and underlying $2.7 billion sex-abuse settlement, saying it provides impermissible legal protections to insurers and the bankrupt youth organization's local councils, among others, Reuters reported. The U.S. Trustee said in a court filing that the nondebtor releases provided to insurers and others, which have not filed for chapter 11, in exchange for contributions to the settlement are not authorized by bankruptcy law. "The plan lacks even a cursory discussion of why the non-debtor releases are necessary," the U.S. Trustee said yesterday's filing, while also noting the releases were so broadly written it was not clear who was covered by them. BSA filed for bankruptcy in February 2020 to resolve allegations by former Scouts spanning decades that they were abused by troop leaders as children. Since then, more than 82,000 abuse claims have been filed in the bankruptcy. The plan aims to resolve all of those claims through the $2.7 billion settlement, which will be funded by insurers, local councils (which are independent legal entities), and BSA itself, among others. Insurers, local councils, committees that represent abuse survivors, current and former BSA officers and employees, and organizations that chartered Scouting units and activities will be among those covered by the nondebtor releases. Anyone who personally committed or was alleged to have committed abuse is not protected.

The opposing sides in the Archdiocese of Santa Fe bankruptcy case are battling over whether certain insurance records should be sealed from public view, the Santa Fe New Mexican reported. Insurance coverage for the archdiocese is a key issue in the effort by victims and the church to reach an agreement in the case that involves more than 400 victims of clergy sexual abuse, most of them children. The chapter 11 bankruptcy case has dragged on for more than three years, and insurance coverage is expected to pay a big chunk of the undisclosed amount of money needed to settle. A Santa Fe attorney who represents several victims objected to confidentiality and sealing of records, contending in an interview yesterday that secrecy is what led to the tragedy of widespread priest abuse of children in the first place. “We’re here because of secrets that have been kept for years and years,” said attorney Merit Bennett. He said the request to seal documents amounts to “going backward in time. It needs to all be transparent.” He said that priests got away with molesting children for decades in part because they held community members’ secrets from the confessional and people were afraid to challenge them. Besides insurance coverage, the archdiocese has sought donations, sold some properties and held an online auction of small properties that ended yesterday. It was the second such auction. The first brought in about $1.4 million, likely a small fraction of the amount needed for a settlement.

Johnson & Johnson tried to get a U.S. judge to block Reuters from publishing a story based on what it said were confidential company documents about the healthcare giant's legal maneuvers to fight lawsuits claiming its Baby Powder caused cancer. "The First Amendment is not a license to knowingly violate the law," said the company in a filing late Thursday in U.S. Bankruptcy Court in New Jersey, where a unit of J&J had sought bankruptcy protection while defending the Baby Powder lawsuits. The First Amendment of the U.S. Constitution protects freedom of the press. On Friday, Reuters reported that J&J secretly launched "Project Plato" last year to shift liability from about 38,000 pending Baby Powder talc lawsuits to a newly created subsidiary, which was then to be put into bankruptcy. By doing so, J&J could limit its financial exposure to the lawsuits. After the publication of the story, Reuters asked U.S. Bankruptcy Judge Michael Kaplan to deny J&J's motion, claiming it was moot. Less than an hour after Reuters submitted its letter, J&J said in a filing that it was withdrawing a request for an immediate hearing on the matter but was "not prepared to agree" that its request regarding the documents was moot. J&J said in its filing after the publication of the story that it intends to continue discussions with Reuters and said it was "heartened that publication of confidential documents may no longer be imminent." J&J's request to block publication was "among the most extraordinary remedies a litigant can request under the law," attorneys for Reuters, a unit of Thomson Reuters, said in a Friday court filing. The news agency's lawyers called J&J's request a "prior restraint of speech on a matter of public interest." J&J said Reuters had obtained documents that were protected from public disclosure by an order from Judge Kaplan. The company demanded that Reuters return the documents and refrain from publishing information gleaned from the documents. Reuters denied that it has confidential information, saying in court papers that the confidentiality of one of the documents was lifted in January and that the second is not in the possession of Reuters.

Pharmaceutical company Mallinckrodt PLC on Thursday won court approval of its reorganization plan, which includes a $1.7 billion settlement of opioid-related litigation, bringing its 16-month bankruptcy close to an end, Reuters reported. Bankruptcy Judge John Dorsey in Wilmington, Del., signed off on the plan in a 103-page written decision. In addition to settling thousands of lawsuits accusing it of deceptively marketing its opioids, the plan allows Mallinckrodt to reduce $5.3 billion in debt by $1.3 billion and hands control of the reorganized company to creditors. Mallinckrodt filed for bankruptcy in October 2020 to resolve more than 3,000 lawsuits from states, local governments and private individuals who accused the company of fueling the opioid epidemic through deceptive marketing, including by playing down the risks of addiction and abuse. The company won the support of committees representing junior creditors and opioid claimants, which had long opposed the plan, for the deal in September. Nearly all U.S. states backed it as well. In approving the plan, Judge Dorsey overruled objections raised by the state of Rhode Island, pharmaceutical company Sanofi, certain insurers and shareholders.

Johnson & Johnson yesterday accused attorneys for people who have sued the pharmaceutical giant over its talc products of sharing confidential documents with Reuters in what it called a “calculated effort” to try its subsidiary’s bankruptcy case in the press, Reuters reported. In a letter filed with the U.S. Bankruptcy Court in New Jersey, attorneys for J&J and LTL Management LLC, a bankrupt subsidiary that the company set up to hold its talc liabilities, claimed that lawyers for two committees representing plaintiffs shared at least two confidential documents with the news organization. Lawyers for the plaintiffs’ committees engaged in a “calculated effort” to “try this case in the press rather than in the court,” LTL attorney Gregory Gordon said in a court hearing shortly after the letter was filed. “Counsel for the committees, apparently, are feeding documents to the press. And we’re specifically aware it’s being done with Reuters,” Gordon said. The J&J lawyers said that the documents it said were leaked were subject to a protective order issued by U.S. Bankruptcy Judge Michael Kaplan. The letter asks Reuters to return the documents it said were leaked and to refrain from disclosing any confidential information they contain. J&J’s lawyers said that if Reuters declined, they would consider petitioning the court to compel the news organization to do so. A Reuters spokesperson called the claims without merit. Read more. 

In related news, law professors opposed to Johnson & Johnson’s baby powder bankruptcy can help opponents of the company make legal arguments against the controversial chapter 11 case, a judge ruled, Bloomberg Law reported. Bankruptcy Judge Michael B. Kaplan agreed to accept a series of legal papers attacking J&J’s decision to put a unit into bankruptcy as a way of resolving lawsuits filed by more than 38,000 people who claim they were harmed by tainted talc in baby powder. Kaplan is scheduled to hold a trial later this month of whether to dismiss the bankruptcy case as requested by lawyers for the talc victims. Read more. (Subscription required.) 

A committee representing consumers suing Johnson & Johnson over its talcum-based baby powder products is challenging a bid to use bankruptcy to freeze litigation against the company and retailers that sold the product, WSJ Pro Bankruptcy reported. The committee, which represents consumers who allege exposure to J&J’s talcum products caused cancer, said in a court filing on Tuesday in the U.S. Bankruptcy Court in Trenton, N.J., that pausing civil lawsuits against J&J, which is not in bankruptcy, could prevent tens of thousands of people dying from ovarian cancer and mesothelioma from having their day in court. J&J faces about 38,000 talc-injury cases that alleged talc-based Johnson’s Baby Powder contained asbestos, a cancer-causing mineral, an allegation J&J has denied. The consumer goods giant moved the talc-injury cases to bankruptcy court last year through a newly formed subsidiary, which filed for chapter 11 in October. J&J stopped selling talcum powder-based products in the U.S. and Canada in 2020 and has maintained that the powder is safe and doesn’t contain asbestos.

The Diocese of Camden has announced a plan to distribute $90 million to survivors of clergy sex abuse, well above its original offer of $10 million as part of a bankruptcy action, the Cherry Hill (N.J.) Courier Post reported. But the proposal was promptly rebuffed by a lawyer for a committee representing sex-abuse survivors. The two sides have clashed repeatedly over the amount of funds to be provided to sex-abuse survivors, with the committee alleging the diocese has undervalued its assets to reduce its exposure. The proposed fund, if approved in U.S. Bankruptcy Court, would be used to resolve some 300 claims, the diocese said in a statement Wednesday night. The diocese would provide “the bulk” of the money, but its parishes “will also contribute a portion,” the statement said. It offered no specifics. It acknowledged the proposal “will cause concern in many parishioners due to its size. However, it is necessary.” “While this settlement may cause the diocese some restriction, it ultimately allows parishes, schools and ministries within the diocese to continue their important work,” the statement said. The diocese filed for chapter 11 protection from creditors in October 2020, citing the financial burden of sex-abuse lawsuits and the pandemic. It initially offered $10 million to settle sex-abuse claims, an amount that rose to $53 million by October 2021. The diocese said its new plan includes $30 million from insurers, who agreed to the payment after a 10-hour mediation session last month.

A federal bankruptcy court judge on Monday extended the deadline for the Diocese of Norwich, Conn., to file its bankruptcy plan to April 15. The deadline had been Feb. 4, The (New London, Conn.) Day reported. After the plan is filed, it will be sent to the creditors of the Roman Catholic diocese for approval by June 14. During that 60-day period, the committee that represents a large group of people, who say they were sexually assaulted by priests and employees affiliated with the diocese, will discuss the proposed plan with the diocese. All creditors of the diocese, including the victims of sexual assault, will vote whether to accept the plan. Eric Henzy, one of the attorneys who represents the creditors' committee, said yesterday that it will not be known how many victims have filed claims with the diocese until March 15, the deadline for doing so. That number could reach 100 or more. The diocese filed for chapter 11 bankruptcy in July as it faced more than 60 lawsuits filed by men who say they were sexually assaulted as boys by Christian Brothers and other staff at the diocese-run Mount Saint John Academy, a school for troubled boys, in Deep River from 1990 to 2002. Since then additional people, whose sexual assault allegations involved not only the school but diocesan churches, have filed claims in the bankruptcy case.

A federal judge on Tuesday extended a legal shield protecting the Sackler family owners of Purdue Pharma from lawsuits to Feb. 17, as they try to reach a deal with several states to settle sprawling litigation stemming from the U.S. opioid crisis, Reuters reported. Bankruptcy Judge Robert Drain said that allowing the legal shield to expire at the end of Tuesday would be “quite foolish,” given the mediator’s report of a possible deal. Purdue, maker of the highly addictive OxyContin opioid painkiller, filed for bankruptcy in 2019 in the face of thousands of lawsuits accusing it and the Sacklers of fueling an American opioid epidemic through deceptive marketing. The opioid abuse crisis has led to nearly 500,000 overdose deaths over two decades, according to U.S. data. Members of the Sackler family have denied the allegations. Purdue’s bankruptcy judge has paused litigation against members of the Sackler family since 2019, seeking to buy time for the company to pursue a reorganization in bankruptcy court. On Monday, the mediator reported that the Sacklers were nearing an agreement to boost their more than $4.3 billion cash contribution to resolve the litigation after negotiating with states that objected to the original terms. Judge Drain said on Tuesday that “all bets were open” as to whether the Sacklers would continue to receive legal protection from opioid lawsuits if the current round of mediation does not result in a new deal.

Latam Airlines Group SA can send its $5.4 billion bankruptcy-exit plan to creditors for a vote, a judge said Tuesday, handing the airline a partial victory over debtholders who want to pursue alternatives, including a takeover by rival Azul SA, Bloomberg News reported. The decision means the company can seek final court approval for its reorganization plan in April and possibly exit bankruptcy several months after that, should it get support from securities regulators in Chile, where Latam is based. Bankruptcy Judge James Garrity rejected arguments that Latam’s proposal is so obviously flawed that it could never win final court approval. Judge Garrity’s decision still allows holdout creditors, including Avenue Capital Management and Pentwater Capital Management, to bring up their objections again when the reorganization comes back to the judge for a final decision. Several obstacles remain before Latam can ask Judge Garrity to bless the reorganization. Later this month, the judge has scheduled a hearing on whether to approve a restructuring support agreement. That deal would help Latam gets its plan approved by guaranteeing support from key creditors, but has drawn scrutiny because it calls for paying those creditors hefty fees. The company must also either refinance, or get an extension of a loan that it took out to help pay for its reorganization. That so-called debtor in possession loan matures in April, company attorney Lisa M. Schweitzer said during a virtual court hearing.