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A federal judge authorized Purdue Pharma LP and its Sackler family owners to appeal a ruling that threw out their $4.5 billion settlement of thousands of lawsuits linked to the bankrupt company’s OxyContin painkiller and its role in the opioid crisis, WSJ Pro Bankruptcy reported. Purdue has until Jan. 17 to apply to the Second U.S. Circuit Court of Appeals for an expedited appeal, U.S. District Judge Colleen McMahon of the Southern District of New York ruled. The Second Circuit can choose whether to accept Purdue’s appeal, which aims to revive a chapter 11 plan to resolve an onslaught of lawsuits alleging that the company and its family owners contributed to opioid addiction. Most U.S. state and local governments backed the settlement with the Sacklers, who received broad releases from opioid-related liability under the bankruptcy plan in exchange. Attorneys general from California, Connecticut and a handful of other states have held out, unsatisfied with the deal terms. Last month, Judge McMahon struck down the chapter 11 plan, saying it went too far by releasing those states’ claims against the Sacklers. On Friday, Judge McMahon allowed Purdue’s appeal to move forward, ruling against the objecting states. The judge acknowledged that allowing the appeal might change states’ negotiating positions with Purdue, but said she didn’t believe it would delay final resolution of the litigation. She said the states were objecting because they were “flush with victory on their appeal and determined to use it to their negotiating advantage.”

Staffing shortages helped push an Iowa chain of nursing homes into bankruptcy as health-care providers continue to struggle with pandemic pressures, Bloomberg News reported. QHC Facilities LLC filed for bankruptcy last week, citing “crippling staffing and employee retention issues” in a court filing. The Clive, Iowa-based company operates eight skilled nursing facilities and two assisted living homes with a total of about 750 beds in the state and 300 workers. Occupancy rates plunged as COVID-19 spread through nursing homes, which accounted for a large proportion of deaths early in the pandemic. At the same time, the health-care sector has suffered from mass resignations as workers face burnout and seek more lucrative employment, contributing to swelling gaps in coverage. The chain was grappling with other problems ahead of the bankruptcy. It’s faced years of fines for substandard patient care, according to the Iowa Capital Dispatch. One of its facilities was damaged in a strong storm in 2020 and still hasn’t been rebuilt. The death of the company’s co-founder in June “had a devastating impact” on the business, his spouse and Chief Executive Officer Nancy Voyna said in the filing, leaving unmet obligations including a $4 million state fee.

The judge overseeing the reorganization of opioid maker Mallinckrodt Plc questioned the fairness of a plan to protect company executives and others from future lawsuits, Bloomberg News reported. Under the company’s $5.45 billion bankruptcy exit plan, company officers and directors could not, in most cases, be sued for their alleged role in America’s opioid epidemic. During a virtual court hearing yesterday on the proposal, U.S. Bankruptcy Judge John Dorsey asked how the legal protections would affect creditors who may want to keep suing Mallinckrodt. The company has argued that the provisions should be approved because the reorganization plan would fall apart without the protections, known as third-party releases. A federal judge in New York rejected similar provisions in Purdue Pharma’s reorganization, a legal finding that, if not overturned on appeal, would blow up the drug maker’s plan to end its multi-billion dollar bankruptcy. “It’s not just an issue of necessity, it’s a question of fairness,” Judge Dorsey said in the Mallinckrodt case. “How is it fair to them? What does it give to them?” The company and critics spent three days in a virtual courtroom this week arguing about whether Dorsey should approve the reorganization plan. The judge, based in Wilmington, Delaware, said he would rule as soon as possible. Most creditors have backed the company’s reorganization plan, including the legal releases. A handful have attacked Mallinckrodt’s proposal, in part because it would strip creditors of the right to sue certain people and entities that are not in bankruptcy, but had a role in Mallinckrodt’s operations. Like Purdue, Mallinckrodt has proposed a trust fund to compensate public agencies and others who claim they were harmed by the addictive painkillers that flooded America and caused a spike in overdose deaths. Mallinckrodt disputes those accusations, but filed bankruptcy in part to find a way to resolve the claims, company attorney Christopher Harris said in court on Thursday.

An Iowa nursing home chain repeatedly accused of providing substandard care for hundreds of seniors has filed for bankruptcy protection, the Iowa Capital Dispatch reported. QHC Facilities, based in Clive, Iowa, operates eight skilled nursing facilities in Tama, Madison, Humboldt, Jackson, Linn, Webster and Polk counties, as well as two assisted living centers. Collectively, the facilities have a maximum capacity of more than 700 residents. The company employs roughly 300 full-time and part-time workers. The company filed for bankruptcy last week, claiming $1 million in assets and $26.3 million in liabilities. In recent years, QHC and its affiliates have been hit with some of the largest federal fines ever imposed against an Iowa nursing home chain, with inspectors stating the company had placed residents in immediate jeopardy due to substandard care. At the same time, however, the company has sued its elderly residents for failure to pay for that care, and has neglected to pay more than $700,000 in fines.

Knox Clinic Corporation in Galesburg, Ill., will file for chapter 11 bankruptcy, according to a letter sent to employees on Tuesday, the Galesburg Register-Mail reported. The clinics at 834 N Seminary St. are connected to Galesburg Cottage Hospital, which lost its accreditation and was notified in December about losing Medicare and Medicaid payments. A letter from Cottage Hospital CEO Sanjay Sharma told employees the clinics, not the hospital, will file for chapter 11 bankruptcy, which will allow it to reorganize and preserve services. News of the hospital losing accreditation and Medicare and Medicaid payments broke Dec. 28. Medicare and Medicaid payments represented 72% of the hospital's net inpatient and outpatient revenue in 2020. Payments for Medicare and Medicaid patients at Cottage Hospital will continue for patients admitted before Jan. 15.

Bankruptcy Judge Robert Drain yesterday ordered mediation in the Purdue Pharma bankruptcy, calling for the company, the Sackler family members that own it and nine states to determine whether they can reach a new opioid litigation settlement by Jan. 14, Reuters reported. Judge Drain issued an order directing the parties to negotiate changes to a previous deal rejected by another judge in December that provided the Sacklers protection against future opioid litigation. Bankruptcy Judge Shelley Chapman is serving as the mediator. If they do not reach agreement by then, the mediation will end and an appeal by Purdue against the deal's rejection will continue. Judge Chapman presided over prior mediation that led to the earlier settlement, under which the Sacklers said they would contribute $4.5 billion to Purdue’s reorganization plan, which directs money toward opioid abatement programs. In exchange, the Sacklers, who have denied wrongdoing, received legal protections known as nondebtor releases.

Eleven states yesterday argued that cities and counties nationally were trying to "usurp" their authority by suing McKinsey & Co Inc for turbocharging the U.S. opioid epidemic, after McKinsey already agreed last year to settle with every U.S. state for $642 million, Reuters reported. A coalition of states led by Ohio Attorney General Dave Yost filed a brief in San Francisco federal court backing the consulting firm's contention that local governments were barred from suing it separately over the settled claims. The attorneys general warned U.S. District Judge Charles Breyer that allowing the local governments to proceed with their "copy-cat" claims would handicap states in future litigation and make it harder for statewide settlements to be achieved. "The problem will only grow worse if this Court does not act early to rule that a State can indeed provide the 'universal peace' of extinguishing all claims, present or future, brought by the State and its component parts," the states argued. The other states that signed onto the amicus brief are Arkansas, Connecticut, Idaho, Indiana, Kansas, Louisiana, Montana, Nebraska, North Dakota and Texas. All but Connecticut have Republican attorneys general, and several previously have taken stances adverse to those of local governments in the broader litigation against drug companies accused of contributing to the epidemic. McKinsey last year reached agreements with state attorneys general to pay $642 million to resolve claims it helped drug manufacturers, including OxyContin maker Purdue Pharma LP, design marketing plans and boost sales of painkillers.

A federal jury convicted Elizabeth Holmes, the startup founder who claimed to revolutionize blood testing, on four of 11 charges that she conducted a yearslong fraud scheme against investors while running Theranos Inc., which ended up as one of Silicon Valley’s most notorious implosions, the Wall Street Journal reported. The verdict caps a steep fall for the former Silicon Valley star who once graced magazine covers with headlines such as “This CEO is Out for Blood” and emulated Apple Inc. co-founder Steve Jobs by wearing black turtlenecks. At the 15-week trial, Ms. Holmes testified in her own defense, showing regret for missteps and saying she never intended to mislead anyone. She accused her former boyfriend and deputy at Theranos of abusing her, allegations he has denied. Ms. Holmes was charged with nine counts of wire fraud and two counts of conspiracy to commit wire fraud under an indictment brought 3 ½ years ago. She was found guilty on three of the nine fraud counts and one of two conspiracy counts. She was acquitted on four counts related to defrauding patients — one charge of conspiracy to commit wire fraud and three charges of wire fraud. The jury failed to reach a verdict on three counts related to investors, after saying earlier Monday it was having difficulty reaching consensus on three of the charges.

Purdue Pharma is seeking to appeal to the 2nd U.S. Circuit Court of Appeals a judge's decision to unravel its restructuring plan that would have insulated its owners from liability in civil opioid-related cases, according to a court filing late on Thursday, Reuters reported. The appeal came after U.S. Bankruptcy Judge Robert Drain in White Plains, N.Y., extended temporary protections until Feb. 1 against opioid-related litigation for the Sackler family members who own Purdue Pharma, giving Purdue and the Sacklers time to pursue the appeal. The decision Purdue seeks to appeal was made on Dec. 16, when U.S. District Judge Colleen McMahon overturned Drain's ruling that freed the billionaire Sackler family from liability in civil litigation over opioids in exchange for a $4.5 billion payment. In the court's decision on the OxyContin maker’s bankruptcy settlement, McMahon found the bankruptcy court did not have authority to grant the release and had asked the appeals court to address whether such releases were legally acceptable. Purdue argued in the Thursday filing that the Bankruptcy Code permits non-consensual third-party release in its case. It also says the U.S. Trustee, which appealed Drain’s approval of the plan, does not oppose its ability appeal to the 2nd Circuit. Purdue filed for bankruptcy in September 2019 amid 3,000 lawsuits accusing the company and Sackler family members of contributing to a public health crisis that has claimed the lives of about 500,000 people since 1999.