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Johnson & Johnson used the lenient venue-selection rules of U.S. bankruptcy law to push tens of thousands of talc-related cancer claims to its bankruptcy court of choice, roughly 600 miles south of the company’s New Jersey headquarters, the Wall Street Journal reported. The New Brunswick, N.J consumer goods giant follows other companies and nonprofits that have filed chapter 11 cases in venues far from their headquarters to weather lawsuits over harmful products or other alleged wrongdoing. J&J formed a new Texas subsidiary to carry its talc liabilities, then converted that entity to a North Carolina-based company days before it filed for bankruptcy. The chapter 11 filing last week effectively shifts to the U.S. Bankruptcy Court in Charlotte, N.C., the fate of nearly 40,000 pending lawsuits alleging talc used in Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. “Further manipulation of the venue statute by creating entities for the sole purpose of filing in a particular jurisdiction does push this to an extreme that is likely to undermine faith in the bankruptcy system,” said Prof. Stephen Lubben of Seton Hall University School of Law. Congress is considering making forum selection rules more restrictive. The rules have long been flexible in allowing companies their preferred location for filing for bankruptcy protection. Sens. Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) reintroduced legislation last month that would require corporations or wealthy individuals to file chapter 11 either in their home state or where they have significant assets. Congressional Democrats criticized J&J’s decision to put its talc claims into chapter 11, describing it as an abuse of the bankruptcy system. J&J has said bankruptcy provides a forum to fairly compensate claimants, and likely quicker than through the traditional trial system. The company has defeated some lawsuits, lost others and maintained that its baby powder is safe.

Generic drugmaker Teligent Inc. filed for bankruptcy protection after the Food and Drug Administration flagged problems at the company’s manufacturing plant in Buena, N.J., that led to a recall and production halt, WSJ Pro Bankruptcy reported. The chapter 11 filing comes days after the resignations of Chief Executive Tim Sawyer and legal chief Philip Yachmetz. Teligent said Thursday that they had left the company, effective Oct. 8, without specifying a reason for their departures. Based in Iselin, N.J., the company filed for chapter 11 protection on Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., with plans to sell its assets. Teligent received a warning letter from the FDA in November 2019 and worked to fix problems at the plant, but failed to get a green light from the regulator following an inspection in July and August, Chief Restructuring Officer Vladimir Kasparov said in a court filing. The company is still working to address issues raised by the FDA, he said. Mr. Kasparov said the company’s finances grew strained as it devoted resources to resolving issues raised in FDA inspections. The COVID-19 pandemic also reduced demand for Teligent’s prescription skin products as elective visits to doctors’ offices slowed, he said. Teligent was previously a contract manufacturer, producing goods for other businesses, but in 2010 it shifted to focus on making generic drugs, according to Mr. Kasparov. The company makes injectable and topical medicines, including those prescribed to treat conditions such as dermatitis, psoriasis and eczema. The company has lined up $12 million in fresh financing in the form of two bankruptcy loans from senior and junior lenders, while rolling up over $15 million in existing loans into the loan facility. Ares Capital Corp. will act as one of the agents on the bankruptcy loans, court records show.

The judge overseeing the bankruptcy case of Johnson & Johnson’s longtime talc supplier disqualified the decisive ballots cast in favor of a cancer-victim compensation plan, ruling that most of one law firm’s asbestos-injury clients had no basis to vote, WSJ Pro Bankruptcy reported. Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., threw into doubt the chapter 11 plan put forth by the defunct supplier Imerys Talc America Inc., saying that more than 15,700 ballots cast in its favor by personal injury lawyer Thomas Bevan can’t be included in the vote totals. The judge’s decision affects a critical vote on the Imerys plan, which is designed to resolve its liability for thousands of lawsuits linking the talc it supplied for J&J baby powder products to ovarian cancer, asbestos poisoning and other ailments. Without yes votes from Mr. Bevan’s clients, the bankruptcy plan falls short of the three-quarters support from injury claimants needed to resolve current and future injury liabilities, as Imerys has proposed, according to the judge’s ruling. An Imerys spokeswoman said Wednesday it is evaluating the appropriate next steps “and will continue to work constructively with all parties to chart a path forward.” J&J, which also faces vast talc litigation, has been opposing the Imerys plan and had sought to disqualify votes submitted by Mr. Bevan’s firm and other plaintiffs’ lawyers who gave their support under what J&J alleged were suspicious circumstances. Wednesday’s ruling stated that Mr. Bevan did nothing to establish that his clients were ever exposed to allegedly dangerous talc products from Imerys that would give them an interest in the chapter 11 plan.

A federal judge said that appeals of a $4.5 billion bankruptcy settlement shielding Purdue Pharma LP’s family owners from civil opioid lawsuits would hinge on whether the agreement is permitted under bankruptcy law and the U.S. Constitution, WSJ Pro Bankruptcy reported. “There’s never been a case like this before,” Judge Colleen McMahon of the U.S. District Court in Manhattan said during a Tuesday hearing over pending appeals arising from Purdue’s chapter 11 proceedings. The Justice Department’s bankruptcy watchdog and a handful of state attorneys general are appealing the drugmaker’s chapter 11 plan and its settlement with members of the Sackler family. Judge McMahon said yesterday that she intends to rule this week on the government authorities’ request to pause enactment of the Sackler settlement and Purdue’s broader reorganization plan, pending the resolution of legal challenges arising out of the bankruptcy. She said that the bankruptcy presents a unique set of facts compared with earlier cases reviewed by the U.S. Court of Appeals for the Second Circuit dealing with the type of legal releases the Sacklers will be provided under the settlement. The U.S. Trustee, the Justice Department unit monitoring bankruptcy cases, and authorities from states including California, Connecticut and Washington have raised concerns about a doctrine called equitable mootness, which they argue could defeat their challenge before higher courts get a chance to consider the legality of the Purdue settlement.

A New York judge said that she will likely issue an order pausing the implementation of Purdue Pharma’s reorganization plan to allow the U.S. Department of Justice's bankruptcy watchdog and a handful of states time to appeal the deal, Reuters reported. U.S. District Judge Colleen McMahon in Manhattan issued a temporary restraining order on Sunday, putting the plan and underlying opioid litigation settlement on hold until Tuesday afternoon, when she will hear arguments on a motion for a longer-term stay. The OxyContin maker secured bankruptcy court approval of its plan and settlement in September, with support from around 40 states and a wide range of municipalities, Native American tribes, hospitals, and personal injury claimants, among others. The deal includes legal protections for the members of the Sackler family that owned Purdue, who are contributing approximately $4.5 billion to the settlement, against opioid-related civil lawsuits in the future. Court documents show that overall approximately $5.75 billion will be placed into trusts that will funnel money to opioid abatement programs and personal injury claimants. DOJ's bankruptcy watchdog, the U.S. Trustee, and a handful of states have appealed the September order, specifically taking issue with the protections for the Sacklers.

Eighteen former NBA players were charged yesterday with pocketing about $2.5 million illegally by defrauding the league’s health and welfare benefit plan in a scam that authorities said involved claiming fictitious medical and dental expenses, the Associated Press reported. “The defendants’ playbook involved fraud and deception,” U.S. Attorney Audrey Strauss told a news conference after FBI agents across the country arrested 15 ex-players and one of their wives in a three-year conspiracy that authorities say started in 2017. According to an indictment returned in Manhattan federal court, the ex-players teamed up to defraud the supplemental coverage plan by submitting fraudulent claims to get reimbursed for medical and dental procedures that never happened. Strauss said prosecutors have travel records, email and GPS data that proves the ex-players were sometimes far from the medical and dental offices at the times when they were supposedly getting treated. In one instance, she said, an ex-player was playing basketball in Taiwan when he was supposedly getting $48,000 worth of root canals and crowns on eight teeth at a Beverly Hills, Calif., dental office in December 2018. The indictment said the scheme was carried out from at least 2017 to 2020, when the plan — funded primarily by NBA teams — received false claims totaling about $3.9 million. Of that, the defendants received about $2.5 million in fraudulent proceeds. Read more.

Health care fraud is one of the many key topics that will be addressed at ABI’s Health Care Program, set for Oct. 25-26 in Nashville, Tenn. (virtual option available). Find out more about the program and register today!

The U.S. Supreme Court yesterday cleared the way for New York to collect a $200 million surcharge imposed on opioid manufacturers and distributors to defray the state’s costs arising from the deadly epidemic involving the powerful painkilling drugs, Reuters reported. The justices declined to hear an appeal by two trade groups representing drug distributors and generic drug makers and a unit of British-based pharmaceutical company Mallinckrodt Plc of a lower court’s decision upholding the surcharge. The law’s challengers included the Association for Accessible Medicines, whose members include drugmakers Teva Pharmaceutical Industries Plc and Mallinckrodt, and the Healthcare Distribution Alliance, which represents wholesale distributors. The alliance’s members include the three largest opioid distributors in the United States, McKesson Corp, AmerisourceBergen Corp and Cardinal Health. They proposed in July paying $21 billion to resolve lawsuits accusing them of fueling the epidemic. Mallinckrodt filed for bankruptcy protection in 2020 and has been seeking to finalize a similar, $1.7 billion settlement. The payments to New York were owed under the Opioid Stewardship Act, which Democratic former Governor Andrew Cuomo signed into law in 2018 to address the costs the epidemic imposed on the state.