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U.S. District Judge Ann D. Montgomery has issued an order closing the receivership of Thomas J. Petters and discharging the Receiver in one of the nation’s largest and most complex Ponzi schemes, according to a DOJ press release. Through the efforts of the receiver, the U.S., and related bankruptcy trustees more than $722 million was distributed to victims and creditors. The U.S. commenced the receivership case in October of 2008 to enjoin the ongoing fraud by Petters and the other named defendants and to preserve all assets owned by the defendants for ultimate restitution and forfeiture in the criminal investigations of the defendants, which were pending at the time. The U.S. immediately moved to freeze the assets of the named defendants, including all assets owned by Petters. On October 14, 2008, the court issued the injunction against Petters and appointed Douglas A. Kelley as the receiver of the assets of Petters and the other named defendants. At the time none of the defendants had yet been indicted. The receiver immediately began taking control of the assets and property owned by Petters and the other named defendants. Petters and the other defendants had created a vast web of more than 150 entities over the course of thirteen years — entities that were all propped up by fraud. Some of the entities, however, were legitimate businesses that employed innocent persons.

The judge overseeing Purdue Pharma’s chapter 11 case has tentatively approved $16.1 million in retention payments for 506 of the company's employees but conditioned his ruling on the OxyContin maker’s successful reorganization, Reuters reported. During a virtual hearing, U.S. Bankruptcy Judge Robert Drain in White Plains, New York, said that he would sign off on the payments — which he said are not the same as bonuses because they are part of the employees’ annual compensation — as long as Purdue doesn’t wind up liquidating in bankruptcy, which at this point in the case is a long shot. Meanwhile Purdue postponed a hearing on up to $5.4 million in proposed incentive bonuses for five top executives until Aug. 19. The company, which filed for chapter 11 protection in September 2019 to address thousands of lawsuits accusing it of fueling the opioid crisis through deceptive marketing, is expected to begin a multi-day hearing to secure Judge Drain’s approval of its restructuring plan and settlement with individuals, states, municipalities, hospitals and others on Aug. 9.

A bankruptcy judge moved to delay a trial over Washington Prime Group Inc.’s restructuring plan, a win for shareholders who say the mall operator might be worth more than the plan implies, WSJ Pro Bankruptcy reported. At a court hearing yesterday, lawyers for Washington Prime and attorneys representing its official committee of shareholders said they agreed to postpone the trial by 2½ weeks, until late August. At the trial, the two sides will present the bankruptcy judge with competing views of the company’s value. Washington Prime filed for bankruptcy last month with a plan to hand ownership to lenders and bondholders led by investment firm Strategic Value Partners in exchange for debt forgiveness. The mall operator said other interested bidders would need to offer a minimum of $2.3 billion. Shareholders say that Washington Prime is rushing the restructuring and that with the COVID-19 pandemic abating and customers returning to in-person shopping, the business might be worth enough to satisfy all its debt obligations and provide a bigger return to its shareholders. The proposed restructuring gives shareholders the choice of dividing among themselves $40 million in cash or as much as 6.1% of shares in the restructured company, as long as they vote in favor of the plan. That is a better outcome for equity than in most bankruptcy cases, which typically leave nothing for shareholders.

Lawmakers heard arguments on Wednesday in favor of amending laws to limit protections for non-bankrupt individuals through a company’s bankruptcy, a move prompted by concerns that members of the wealthy Sackler family who own Purdue Pharma LP may avoid accountability for their role in promoting opioid sales, Reuters reported. The hearing yesterday before the U.S. House of Representatives’ Judiciary’s Subcommittee on Antitrust, Commercial and Administrative Law came as Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Richard Blumenthal (D.-Conn.), as well as Reps. Jerry Nadler (D-N.Y.) and Carolyn Maloney (D-N.Y.), announced legislation in the House and Senate aimed at reforming certain areas of bankruptcy law. The Nondebtor Release Prohibition Act of 2021 would prohibit litigation shields for owners or insiders of bankrupt companies. Though not included in the legislation, Wednesday’s hearing also focused on potential reforms to limit the ability of bankrupt companies to select judges they think will be favorable to them. The issue of so-called third-party or non-debtor releases, has been a hot topic in Purdue’s chapter 11 case. Connecticut Attorney General William Tong testified yesterday’s hearing that legislation is needed to prevent cases like Purdue’s, where Sackler family members are set to receive releases of lawsuits over their role in the national opioid epidemic in exchange for $4.5 billion. The money is being put toward trusts that will distribute the funds to states for opioid abatement programs and to people and entities that brought opioid-related lawsuits. Tong is one of a handful of remaining state attorneys general opposing the Purdue deal. Lawmakers also heard from bankruptcy experts about the ability of lawyers for large companies to select the judge they feel will provide the best results for them. Prof. Adam Levitin of Georgetown University Law School testified that bankruptcies should be randomly assigned to judges within a district without regard to which division they sit in. Read more.
https://www.reuters.com/article/us-bankruptcy-reform-bill-idUSKBN2EY2XO

Click here to view the witness list, prepared testimony and an archive file to watch a replay of the hearing.
https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=4666

People alleging that Johnson & Johnson’s talc-based baby powder caused their cancer are seeking to restrain the company from taking steps toward a possible bankruptcy filing covering liabilities from thousands of personal-injury claims, WSJ Pro Bankruptcy reported. A committee representing talc-injury claimants said in court papers filed Tuesday that it needed a federal court order forbidding J&J from any “corporate machinations” that would isolate talc liabilities from the rest of the business. J&J has told personal-injury lawyers it is considering placing a corporate subsidiary with talc liabilities in bankruptcy as a way to resolve thousands of personal-injury lawsuits. Placing a corporate affiliate in bankruptcy would give J&J powerful legal tools to drive settlements of thousands of lawsuits linking Johnson’s baby powder to ovarian cancer and the asbestos cancer mesothelioma. The injury claimants disclosed the request for a restraining order in the bankruptcy proceedings of a separate company, Imerys Talc America Inc., which supplied talc to J&J and is named as a co-defendant in pending talc lawsuits. Overwhelmed by the litigation, Imerys filed for bankruptcy in 2019 and has proposed a settlement with injury claimants that isn’t supported by J&J. Read more. 

In related news, A U.S. congressional panel has asked Johnson & Johnson (JNJ.N) to provide it all documents related to the company's plans to put its talc liabilities into bankruptcy, according to a letter sent on Wednesday and seen by Reuters. Democrat Raja Krishnamoorthi, chairman of the U.S. House of Representatives Committee on Oversight and Reform's subcommittee on economic and consumer policy, wrote that the panel is trying to learn how J&J's plans may affect people who have said they were harmed by the company's baby powder. Krishnamoorthi also asked J&J to turn over documents showing how much funding it would provide to the new entity. The level of funding could determine payouts for victims. The healthcare company faces legal actions from tens of thousands of plaintiffs, including women suffering from ovarian cancer and others with mesothelioma, alleging that its baby powder and other talc products contained asbestos and caused cancer. Read more. 

Sen. Richard Blumenthal (D-Conn.) and Connecticut Attorney General William Tong said Monday that they are backing federal legislation that would block the Sackler family from using bankruptcy law to protect a fortune earned from Purdue Pharma’s manufacture of deadly opioids, the Hartford Courant reported. Blumenthal and Tong said that a bill before Congress would close a loophole in the U.S. Bankruptcy Code which they say the Sackler family has used to evade liability in government lawsuits. Connecticut and other states are still pursuing litigation against Purdue Pharma, which is owned by the Sackler family. The bill, dubbed the SACKLER (“Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases”) Act, would amend bankruptcy law to prevent non-bankrupt individuals from receiving legal protections through a company’s bankruptcy. Speaking at the State Capitol Monday, Blumenthal argued that the Sackler family, which owns Purdue Pharma, has used the company’s bankruptcy proceedings to gain release from liability. Purdue Pharma filed for chapter 11 protection in 2019 in an attempt to settle about 3,000 lawsuits it faced from state and local governments and other entities. The plaintiffs had claimed that the company’s marketing of its painkiller drove a crisis that has resulted in nearly 500,000 deaths across America in the last two decades.

Remington Arms Co. on Tuesday offered to pay nearly $33 million to nine families to settle lawsuits claiming that its marketing of firearms contributed to the 2012 Sandy Hook school massacre in Newtown, Connecticut, where 26 people died, Reuters reported. The proposed settlements would provide $3.66 million to relatives of each victim, subject to approval by the federal judge overseeing Remington’s bankruptcy case in Alabama. Remington’s proposed payout is only a small fraction of the damages that the nine families claimed to have suffered. In a February court filing, their lawyers estimated that wrongful death claims likely totaled more than $225 million, and total claims including punitive damages could exceed $1 billion. Remington had filed for chapter 11 protection in 2018 and emerged the same year under the control of its creditors. It filed for bankruptcy again in July 2020, after more retailers restricted gun sales following other school shootings.

Official advisers to Washington Prime Group Inc. stockholders, skeptical of the company’s proposed sale to SVPGlobal, are trying to slow down the mall landlord’s bankruptcy, Bloomberg News reported. A government-appointed group of Washington Prime stockholders has asked Judge Marvin Isgur to extend key deadlines in the insolvency proceedings by more than a month, arguing in court papers that the group’s advisers don’t have enough time to evaluate the real estate investment trust’s chapter 11 exit plan. Washington Prime may be worth more than the plan implies, but more time is needed to figure that out, the group says. Washington Prime entered bankruptcy last month after the pandemic forced shoppers to stay home, crushing its tenants and sapping revenues. But rising vaccination rates and a resurgent U.S. economy have begun to reverse the company’s fortunes, making it difficult to pin a value on its portfolio of roughly 100 shopping centers across the U.S. The company plans to exit bankruptcy by handing ownership to investment firm SVPGlobal in exchange for debt forgiveness, assuming no better offers come in. But the plan’s August approval deadline leaves relatively little time for competing bidders to make moves, and the company has said new offers must be all cash and exceed $2.3 billion. Read more.

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

A New York trial judge has let a breach of contract claim brought by former directors at RCS Capital Corp proceed against hedge fund Luxor Capital Partners LP in connection with litigation over RCS Capital's 2016 bankruptcy, Reuters reported. New York Supreme Court Justice Andrew Borrok in Manhattan ruled on Monday that the ex-directors, led by former RCS Capital executive chairman and real estate investment trust pioneer Nicholas Schorsch, can move ahead with a claim accusing Luxor of violating an agreement to waive its right to sue over certain RCS Capital transactions. Borrok dismissed two claims accusing Luxor and one of its senior executives of tortiously interfering with that same agreement by influencing another party to violate the contract too. Schorsch and three other former RCS Capital board members sued Luxor and executive Michael Conboy in New York Supreme Court in May for allegedly inducing a creditor trust to file an action against the former directors, RCS Capital Management and several affiliates in May 2017 in the Delaware Court of Chancery. The trust, called RCS Creditor Trust, filed the complaint over the investment firm’s 2016 bankruptcy and attempts to sell its distribution business. The creditor trust alleged that the former RCS Capital directors used their “virtually unfettered power” to benefit another of their businesses, AR Capital LLC, at RCS’ expense. AR Capital was responsible for creating real estate investment trusts and other investment vehicles and then selling them to affluent individuals, while RCS Capital provided resources to support AR Capital's work, according to the Delaware complaint.