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When investors took over prison healthcare provider Corizon in December 2021, it was on the brink of a bankruptcy filing to weather the loss of key contracts, hundreds of prisoner lawsuits and mounting debts to hospitals and doctors, WSJ Pro Bankruptcy reported. The company, among the nation’s largest correctional health companies, is now nearing a chapter 11 restructuring that would settle those claims for less than its creditors have demanded—without ever appearing in bankruptcy court itself. Its owners could retain control of the business, cleansed of old debts and lawsuits, as it rebuilds its market share under its new brand name, YesCare. YesCare has put a new spin on the Two-Step. The company split itself in May 2022 into an operating business holding its government contracts and a Texas subsidiary called Tehum Care Services that was made responsible for its unpaid bills and legal liabilities. Tehum then filed for chapter 11 in February, carrying into bankruptcy court the debts and liabilities to prisoners, healthcare providers, insurance companies and others accumulated under the company’s prior ownership. In bankruptcy, Tehum has powerful tools at its disposal to resolve creditors’ claims against it—and against its rebranded affiliate YesCare.

Bankrupt drugmaker Mallinckrodt is in talks with major investors about selling some or all of its business units, which could lead to its exit from the opioid business, according to a WSJ Pro Bankruptcy report. Some investors, poised to take control through the company's ongoing bankruptcy proceedings, are suggesting Mallinckrodt break up its business units. The Ireland-based company filed for its second bankruptcy in the United States last month, with a restructuring plan that would cut $1 billion from what it owes to victims of the U.S. opioid crisis. Mallinckrodt, which makes both branded and generic drugs, had first filed for bankruptcy in 2020 to address its high debt load, litigation over its marketing of highly addictive generic opioids and disputes over its drug pricing. As part of its plan to emerge from bankruptcy in June 2022, the company, which denied wrongdoing, agreed to pay $1.7 billion to settle about 3,000 lawsuits alleging it used deceptive marketing tactics to boost opioid sales. Mallinckrodt also disclosed in filings with the Securities and Exchange Commission last month that it recently received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia, seeking information about its reporting of suspicious opioid orders to the U.S. Drug Enforcement Administration.

For months, John Jay Ray III, the corporate turnaround expert who was appointed to oversee the bankruptcy of the FTX crypto exchange, has attacked the company’s founder, Sam Bankman-Fried, accusing him of “old-fashioned embezzlement.” Now, Mr. Ray has a new target: Mr. Bankman-Fried’s parents, the New York Times reported. FTX yesterday filed a lawsuit in federal court in Delaware accusing Joe Bankman and Barbara Fried, longtime Stanford law professors, of using their “access and influence within the FTX enterprise to enrich themselves.” The lawsuit seeks to claw back millions of dollars the couple received from their son. In the complaint, FTX’s lawyers said that Mr. Bankman and Ms. Fried got a $10 million cash gift from Mr. Bankman-Fried, as well as a $16.4 million home in the Bahamas, where FTX was based, that was purchased by the exchange. The suit also claims that Mr. Bankman helped cover up complaints by a former lawyer for his son’s business, and that Ms. Fried coached Mr. Bankman-Fried and another FTX executive to evade disclosure requirements for political donations.

A federal bankruptcy court hearing on Endo International's proposal to sell the pharmaceutical company to its senior lenders, which are owed nearly $6 billion, will not be held until October, the Philadelphia Business Journal reported. The hearing was initially slated to take place in late August. It was rescheduled for last week, before being rescheduled again. The new hearing date is Oct. 19 at 11 a.m. in the U.S. Bankruptcy Court for the Southern District of New York. Objections must be filed by Oct. 12. No reason for the delay was provided in court documents. Endo is domiciled in Ireland and has its U.S. headquarters in Malvern, Pa.. The company filed for chapter 11 bankruptcy protection last August while dealing with thousands of opioid-related lawsuits and with mountings debts of about $8 billion. The company — which now focuses on specialty pharmaceuticals, sterile injectable drugs and generic medicines — marketed generic pain medicines containing opioids up until late 2016. Its proposed deal to emerge from bankruptcy includes a provision under which the senior lenders agree to fund the almost $600 million in opioid settlements that Endo has agreed to pay to U.S. states and people affected by opioid addiction. The senior lenders have also agreed to establish a trust for future opioid claimants. The transaction has drawn objections from four federal agencies — the Department of Justice, the Internal Revenue Service, the Department of Health and Human Services and the U.S. Department of Veterans Affairs. The government said that the deal violates U.S. bankruptcy law because it provides payments to some of the company's creditors, including the opioid claimants, while federal government agencies and other creditors "have been singled out to recover nothing." In its objection, the government agencies called the proposed sale "an abuse of the bankruptcy system that is plainly unlawful and should be rejected by this court." Additionally, the court filing notes, the Department of Justice is pursuing billions of dollars in claims against Endo tied to alleged tax debts, overpayments for the company's medications by the government, and its ongoing criminal investigation into the company's opioid marketing practices.

Just when you think the debate about the legal, ethical or practical implications surrounding third-party releases in mass tort chapter 11 cases cannot get any more convoluted, another real-world example rears its ugly head and makes our brains hurt again, according to a new commentary from Tom Salerno of Sintson LLP (Phoenix). Truth is indeed stranger than fiction! In last Monday’s Law360, it was reported that LTL Management LLC (LTL), the Johnson & Johnson (J&J) subsidiary into which its talcum powder claims were deposited, is suing a doctor who published a report linking talcum powder (specifically asbestos in talcum powder) to personal injuries (mesothelioma). Of course, we are all aware that prior to this announcement, J&J and LTL had been dealing with thousands of claims that talcum powder produced by J&J caused cancer (the “Cancer Talcum Claims”). It is unclear how widespread the victim class is for this new aspect of poisonous talcum powder (the “Asbestos Talcum Claims”), but let’s posit for a moment that this becomes a large class of victims. To set the stage, we are all aware that LTL has been bounced out of bankruptcy not once, but twice by the Third Circuit based on essentially lack of good faith and the unavailability of third-party releases for mass tort trust settlement devices to deal with the Cancer Talcum Claims. Let’s call this the “Mass Tort Settlement Protocol,” which funnels victims’ claims into a trust funded by the debtors and third parties (such as insurance companies and, in the Purdue Pharma case, Sackler family members and controlled entities), and which provides releases to those third parties who fund the trust, exchanging civil liability for payments to the trust. Not surprisingly, third-party releases are an integral and essential part of the Mass Tort Settlement Protocol. No release, no funding. Read the full commentary.
*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.

Salerno will be one of the featured panelists on the "SCOTUS Crossfire: Will Purdue Be the Last Mass Tort Bankruptcy?" abiLIVE webinar on Oct. 4. See the full panel of experts and register today for FREE by clicking here.

FTX objected to BlockFi’s bankruptcy plan Wednesday, claiming it “still suffers from certain fundamental shortcomings,” BlockWorks reported. FTX’s attorneys believe that “the Plan unfairly discriminates against the FTX Claims in certain respects” and have asked the court to deny the plan. The opposition comes after BlockFi claimed it fell victim to FTX’s former CEO Sam Bankman-Fried actions. FTX is accused of misappropriating and commingling customer funds with Alameda Trading, its sister firm, in a scheme to defraud investors. FTX is attempting to recover both loan repayments and collateral from the bankrupt crypto lender. “The FTX Debtors do not seek to impede the BlockFi Debtors’ efforts to return value to their creditors, but, in the absence of a consensual resolution, must ensure any plan is fair to the FTX Debtors’ creditors, who are the beneficiaries of the FTX Claims,” the Wednesday filing said.

As Alex Jones continues telling his Infowars audience about his money problems and pleads for them to buy his products, his own documents show life is not all that bad — his net worth is around $14 million and his personal spending topped $93,000 in July alone, including thousands of dollars on meals and entertainment, the Associated Press reported. The conspiracy theorist and his lawyers file monthly financial reports in his personal bankruptcy case, and the latest one has struck a nerve with the families of victims of Sandy Hook Elementary School shooting. They’re still seeking the $1.5 billion they won last year in lawsuits against Jones and his media company for repeatedly calling the 2012 massacre a hoax on his shows. In an Aug. 29 court filing, lawyers for the families said that if Jones doesn’t reduce his personal expenses to a “reasonable” level, they will ask the bankruptcy judge to bar him from “further waste of estate assets,” appoint a trustee to oversee his spending, or dismiss the bankruptcy case. On his Infowars show Tuesday, Jones said he’s not doing anything wrong. “If anything, I like to go to nice restaurants. That is my deal. I like to go on a couple of nice vacations a year, but I think I pretty much have earned that in this fight,” he said, urging his audience to donate money for his legal expenses. Jones’ spending in July, which was up from nearly $75,000 in April, included his monthly $15,000 payment to his wife, Erika Wulff Jones — payouts called “fraudulent transfers” by lawyers for the Sandy Hook families. Jones says they’re required under a prenuptial agreement.

U.S. appeals court judges questioned a 2-1/2-year pause in a shareholder lawsuit against PG&E Corp officers and directors on Wednesday, suggesting that they could allow the case over statements about the utility's wildfire prevention measures to go forward, Reuters reported. A New Mexico pension fund sued 44 of PG&E's corporate leaders in 2018 on behalf of a proposed class of investors who lost money on the utility after its long-neglected electrical grid ignited wildfires in California that killed more than 100 people. U.S. District Judge Edward Davila paused the case in September 2022 until the end of PG&E's bankruptcy case. Though the company emerged from bankruptcy in 2020, the bankruptcy court is still handling claims, including 8,000 individual shareholder claims against the company. A three-judge panel of the U.S. Court of Appeals for the 9th Circuit questioned the need for those claims to be heard before investors can sue PG&E's officers and directors, who are not debtors in the bankruptcy. U.S. Circuit Court Judge Danielle Forrest called the stay "a little puzzling." "What is the efficiency that we are even gaining here? Other than the district court doesn't have to do any work right now," she said. Attorney Stephen Blake, arguing for the directors and officers, said the stay would help avoid inconsistent rulings between the bankruptcy court and the district court. Carol Villegas, an attorney for the shareholders, many of whom have not pursued claims against PG&E in the bankruptcy, said the class claims are worth billions of dollars and insurance proceeds that could cover damages have dwindled.

FTX received court approval to sell over $3 billion worth of cryptocurrency that has been frozen since the exchange’s collapse, a move that would help repay its customers and reduce its exposure to sudden changes in crypto prices, WSJ Pro Bankruptcy reported. While FTX has said its nearly 10 million customers likely won’t recoup all the crypto they deposited, the company has been seeking approval in bankruptcy court to sell assets that would partially reimburse them. FTX also said it wants to sell its tokens that have been frozen in bankruptcy for dollars to cut its exposure to swings in crypto prices. FTX lawyers said yesterday that because customer funds were commingled into a general account at the bankrupt exchange, there was no way to track down which user owned any particular coins. The assets in question are the property of FTX’s chapter 11 estate, said FTX lawyer Andrew Dietderich.

The Boy Scouts of America's $2.46 billion sex abuse settlement is facing new legal uncertainty as the U.S. Supreme Court weighs how far bankruptcy courts can go to protect non-debtors, a fact acknowledged on Tuesday by the judge overseeing the youth organization's bankruptcy, Reuters reported. Chief U.S. Bankruptcy Judge Laurie Silverstein said at a court hearing in Wilmington, Del., that she would continue to hear disputes related to the Boy Scouts settlement without waiting for a Supreme Court decision in the case of Purdue Pharma. The drugmaker is seeking to resolve thousands of lawsuits related to its allegedly deceptive marketing of the addictive painkiller Oxycontin in bankruptcy. The high court agreed in August to hear a challenge by the Biden administration to the legality of Purdue's bankruptcy settlement, putting on hold a deal that would shield its wealthy Sackler family owners from lawsuits over their alleged roles in the country's opioid epidemic. They have denied wrongdoing. Abuse claimants opposed to the Boy Scouts' settlement on Friday had asked U.S. District Judge Richard Andrews to issue a stay that would stop the settlement from moving ahead until the Supreme Court ruling in Purdue, saying that the settlement should not cut off their ability to sue non-bankrupt organizations, such as churches who co-sponsored Scouting programs.