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Jones Day LLP’s help in creating Johnson & Johnson’s talc liability spinoff should disqualify the firm from serving as the unit’s lead bankruptcy counsel, the Justice Department and thousands of talc injury claimants said, Bloomberg Law reported. Jones Day “appears to be the architect” of J&J’s October corporate restructuring, the U.S. Trustee’s office said in a court filing on Wednesday. The move, known colloquially as the Texas Two-Step, allowed the manufacturing giant to isolate its exposure to more than 35,000 baby powder injury lawsuits and address those claims in chapter 11. By assisting J&J through the divisional merger and bankruptcy filing, Jones Day appears to lack the independence to be a fiduciary for the debtor, the U.S. Trustee told the U.S. Bankruptcy Court for the District of New Jersey. A law firm representing thousands of talc injury claimants also filed an objection Wednesday to Jones Day’s application to represent J&J unit LTL Management LLC. LTL Management filed for chapter 11 in October, seeking to use special federal rules that allow bankrupt companies to set up a trust fund to pay all current and future asbestos claims. The J&J unit faces consumer claims that its baby powder caused asbestos-related health problems, including ovarian cancer. It has proposed paying all alleged victims through a trust funded with at least $2 billion. The case was moved from North Carolina to New Jersey last month after a bankruptcy judge determined that the company lacked ties to the former state. A committee of talc injury claimants has called for a total dismissal of the bankruptcy.

The bankruptcy case of a Canonsburg, Pa.-based oilfield construction company that closed abruptly late last month will occur in Pittsburgh instead of Texas after the company opted not to contest the involuntary bankruptcy case filed in the Pittsburgh federal bankruptcy court last month instead of one it filed last week in Houston, the Pittsburgh Business Times reported. GW Ridge LLC was a natural gas pipeline project manager and oilfield services firm that stopped operations in late November. The company had at one time at least 200 employees and a headquarters on Technology Drive in Southpointe, and had done pipeline construction for several major companies. But it ran aground months after what GW Ridge in a filing in U.S. Bankruptcy Court for the Southern District of Texas called "material misconduct" that was discovered earlier this year and led to a $2.1 million tax liability and an inability to continue. Several local creditors, owed $337,000 and represented by the Law Office of Robert O Lampl in Pittsburgh, on Nov. 22 filed an involuntary chapter 7 bankruptcy against GW Ridge LLC in U.S. Bankruptcy Court for the Western District of Pennsylvania. That was followed a week later by the company on Dec. 1 filing bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas and subsidiaries Ridge Payroll and Ridge Holdings Dec. 2 in the same court. Ridge Payroll handled payroll for GW Ridge, according to filings. There had been a question about whether the Pittsburgh or Texas courts would handle the GW Ridge bankruptcies, but on Tuesday in Houston, GW Ridge filed a motion seeking a dismissal of the case in Texas in favor of proceeding with the bankruptcy filed by the creditors and the Lampl office in Pittsburgh.

Nordic Aviation Capital AS is planning to file for chapter 11 bankruptcy this month to carry out its restructuring plan, Bloomberg News reported. The aircraft lessor has reportedly shored up support from its largest creditors to implement the plan. Major creditors have also agreed to provide financing to help fund Nordic Aviation’s operations through bankruptcy. Under a previous agreement with its biggest creditor groups, Nordic Aviation said it would convert “a substantial amount” of the group’s debt into equity and raise a $300 million equity rights offering and a $200 million revolver. Debt-holders, led by Silver Point Capital and Sculptor Capital Management, are set to take control of the aircraft lessor, Bloomberg reported. The company remains on track to raise $500 million of new money. Founded in Denmark in 1990, Nordic Aviation leases almost 500 aircraft to about 70 airline customers around the world. As of June 2020, it had around $5.7 billion of debt. Like many of its peers, the company has struggled to contend with the slowdown in air travel amid the pandemic. Nordic Aviation lost $2.36 billion in the fiscal year that ended June 30 after it wrote down the value of aircraft and other assets. Its lease revenue slumped 15% year-over-year to $642 million.

A debate is raging in federal court over whether the owners of Purdue Pharma LP, members of the billionaire Sackler family, secured protection for themselves from future opioid lawsuits by abusing the U.S. bankruptcy system, Bloomberg News reported. U.S. District Judge Colleen McMahon is worried about the answer and its implications for her upcoming ruling on an appeal of the drugmaker’s opioid settlement. The deal would rout billions of dollars to opioid abatement efforts and see Purdue’s assets turned over to the states, cities and counties suing it over its role in the crisis. Particularly troubling to Judge McMahon is how aggressively Purdue’s owners siphoned cash out of the company after a 2007 guilty plea over the way it marketed OxyContin. Distributions skyrocketed to more than $10 billion -- though close to half went to taxes -- from 2008 to 2018, compared to about $1.3 billion in a more-than-10-year period preceding the plea. That’s important, because members of the family are receiving sweeping legal protection from future opioid lawsuits in exchange for a more-than-$4 billion contribution to the settlement. The releases would even bar people who don’t agree to them -- including a handful of state attorneys general -- from bringing civil suits against the family members over their role in the opioid crisis. Judge McMahon said Purdue’s owners may have “made themselves necessary” to the settlement by taking so much cash out of the company. The explanation for the uptick in cash transfers, according to lawyers for descendants of Mortimer Sackler and Raymond Sackler, is simple and in no way nefarious: Purdue started making a lot more money than it once did. Read more. 

*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.

The judge overseeing the Boy Scouts of America’s chapter 11 case terminated a retired bankruptcy judge from his role mediating talks on the youth group’s sex-abuse compensation plan, saying that he had a stake in the outcome and was no longer impartial, WSJ Pro Bankruptcy reported. Kevin Carey, who entered private practice in 2019 after serving 19 years as a bankruptcy judge, can’t continue as a mediator in the Boy Scouts case, according to a ruling issued Tuesday by Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del. Judge Silverstein said that she was concerned that Carey, while serving as one of two court-appointed mediators, had also been named as a special reviewer under the youth group’s chapter 11 plan, tasked with evaluating certain sex-abuse claims and their likely entitlement to insurance coverage after the Boy Scouts leave bankruptcy. 

Members of the Sackler family on Monday said billions of dollars they collected from Purdue Pharma before the company filed for chapter 11 was the result of extra cash, not part of a "secret plan" to abuse the bankruptcy system, Reuters reported. In court papers, lawyers for the Sackler family members, who controlled Purdue, rejected U.S. District Judge Colleen McMahon’s suggestion that the more than $10 billion Purdue paid out in the years leading up to the 2019 bankruptcy could amount to an abuse of the chapter 11 process. Around half of the money went to taxes or business investments, according to court documents. The Sacklers are alleged to have drained Purdue of cash over several years. When it eventually filed for bankruptcy in the face of lawsuits over the epidemic, the company needed Sacklers' money to settle the billions of dollars of legal claims. In return, the Sacklers were able to demand protection from the lawsuits. The Sacklers rejected the notion that there was any "scheme" to "deliberately weaken Purdue so it could not reorganize without" their financial contribution. There is no evidence to suggest the payments “were made as part of a secret plan” to abuse the bankruptcy system, the Sackler lawyers said. They called the idea “pure fiction.” McMahon is considering whether to overturn a bankruptcy court ruling that shields the Sacklers from liability over the opioid epidemic. If she finds that there is sufficient evidence of abuse, she could send the matter back to the bankruptcy court to reconsider the shield.

A bankruptcy judge cleared Mallinckrodt PLC of liability for allegedly charging anticompetitive prices to health insurers on its flagship product, rejecting their claims for $382 million in antitrust damages, WSJ Pro Bankruptcy reported. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., ruled yesterday that Humana Inc. and other health insurers had failed to prove that the high price charged by Mallinckrodt for its H.P. Acthar gel product after its chapter 11 filing last year stemmed from ongoing anticompetitive conduct. As a result, the insurers aren’t entitled to the $382 million in top-ranking administrative claims they had brought against Mallinckrodt in its chapter 11 proceedings, Judge Dorsey said. Humana and others had sued Mallinckrodt before its bankruptcy over price increases for Acthar, which is used to treat infantile spasms, multiple sclerosis and other ailments and costs roughly $38,000 a vial, up from about $50 in 2001. The insurer argued the cost of any wrongdoing should continue to accrue while Mallinckrodt is in bankruptcy and be treated as administrative expenses, which must be paid in full ahead of other creditors for the company to leave chapter 11. Humana has said it continues to pay about $7.5 million every month for the drug, a price it alleged is inflated by anticompetitive conduct.

The Archdiocese of Santa Fe, N.M., will hold another online auction beginning Jan. 31 to sell more parcels of land for a settlement with close to 400 victims of clergy abuse, the Santa Fe New Mexican reported. No settlement has been reached since the archdiocese filed for chapter 11 bankruptcy three years ago. The archdiocese hopes to raise enough money through property sales, donations, insurance and other methods to work out a group settlement, so each victim isn’t addressed in separate lawsuits. The online auction will conclude Feb. 7. The auction’s website, www.ASFbankruptcyauction.com, will be available on Jan. 3 and will list the parcels involved. SVN Auction Services of Florida and Louisiana will oversee the auction, as it did the first one in September. That auction generated about $1.4 million for the archdiocese, said Louis Fisher III of SVN, although officials are still closing on some of the transactions. Attorney Aaron Boland of Santa Fe, who represents one of the victims, said the archdiocese’s insurance policies — and how much insurance companies will pay out — are a much bigger matter than the auctions. Fisher said the second auction would include 427 properties packaged into 80 bundles in 16 New Mexico counties. He said he hoped the archdiocese could generate $2 million to $4 million, but that it was hard to estimate.

Johnson & Johnson is trying to figure out how to divide its supply chain and substantial financial holdings as part of a planned split into two publicly-traded businesses, the Wall Street Journal reported. The New Brunswick, N.J.-based healthcare and consumer-goods giant last month said it would split off its consumer-health business, which sells Tylenol medicines, Band-Aid bandages and Johnson’s Baby Powder, into a so-far unnamed company in 18 months to two years. The company is considering spinning out the unit and holding a stock offering. J&J’s consumer-health unit generated $14.1 billion in sales last year, compared with $45.6 billion for pharmaceuticals and $23 billion for medical devices, according to a filing with securities regulators. The company operated 90 manufacturing facilities globally at the end of 2020. J&J’s split won’t necessarily be more complex or challenging than those of other companies, but questions remain about how issues such as litigation will be handled, said Damien Conover, director of healthcare research at research firm Morningstar Inc. For example, it is unclear which business would handle future litigation relating to when the companies were one, he said. A spokeswoman for J&J declined to comment. The company in October placed into bankruptcy its liabilities for thousands of lawsuits tying talc-based products to cancer. “It’s pretty likely that litigation stays with the separate companies and the cash flows are strong enough to support that, but still, there’s a bit of uncertainty,” Mr. Conover said.

Members of wholesale power supplier Brazos Electric Power Cooperative Inc. are challenging its bankruptcy strategy following the Texas winter storm that knocked out power for millions and left Brazos with a $2 billion energy bill, Reuters reported. Tri-County Electric Cooperative, one of Brazos’s largest members, filed papers on Wednesday accusing Brazos of pursuing a restructuring proposal that would place the financial burden on the backs of retail and commercial ratepayers. Its statements came in an objection to Brazos’ request to extend its control over the bankruptcy process until March 28, 2022. Brazos, the largest electric coop in Texas, filed for chapter 11 protection in March after it was hit with a $2 billion energy bill from the state’s electric markets operator, the Electric Reliability Council of Texas (ERCOT). The bill for the seven-day storm 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, around 500 times the usual rate. Brazos and ERCOT have since been in litigation in bankruptcy court over the bill. Now, Brazos says it needs more time to file a reorganization plan with the court. But Tri-County and another major member, CoServ Electric, say Brazos has not seriously considered options that they say would bring in more money to the estate without sticking ratepayers with the bill. Tri-County and CoServ say that Brazos should consider selling some of its transmission, distribution and generation assets. Instead, they say, Brazos is focused on the securitization of the ERCOT claim, which they say would pass along significant costs to ratepayers.