%1

A bankruptcy judge rejected a sex-abuse compensation plan for the Diocese of Camden, N.J., saying that it would violate the rights of insurance companies on the hook for payment to abuse survivors, Bloomberg News reported. Judge Jerrold Poslusny said that he couldn’t release the Camden diocese from bankruptcy because its plan for compensating hundreds of sex-abuse victims would expose its insurers to paying potentially inflated or fraudulent claims. Camden’s failure to win court approval to exit bankruptcy after nearly three years highlights the growing discord among sex-abuse plaintiffs, insurers and religious organizations in a handful of recent chapter 11 cases stemming from childhood abuse. The Roman Catholic diocese, bankrupted by sex-abuse lawsuits, agreed last year to contribute more than $87 million to compensate over 360 abuse survivors on its way out of chapter 11. The reorganization plan left room for victims to pursue further compensation from insurance companies through litigation once the bankruptcy case ended. Judge Poslusny of the U.S. Bankruptcy Court in Camden took issue with several aspects of the Camden diocese’s proposed plan, including the appointment of a so-called neutral third party with the power to value each survivor’s sex-abuse claims. He also determined that abuse plaintiffs would have too much influence over the neutral administrator, potentially inflating the value of abuse claims and ultimately the amount of money the trust would pursue from insurance companies.

3M’s board approved a $6 billion settlement to resolve claims that its earplugs caused hearing loss among veterans, putting a long-awaited price tag on a large chunk of the company’s legal troubles, the Wall Street Journal reported. The settlement is substantially less than the $10 billion to $15 billion some analysts expected. 3M shares climbed on Monday after news of the initial settlement terms was reported over the weekend. 3M said that it would pay $5 billion in cash and $1 billion in stock between 2023 and 2029 to settle the allegations. The company will book a pretax charge of $4.2 billion in the third quarter. 3M said it is seeking insurance recovery to offset some of the settlement payments. Aearo, a company 3M bought in 2008, is suing its insurance carriers related to the litigation. Veterans allege that 3M and Aearo Technologies, a company 3M acquired in 2008, produced faulty earplugs that failed to protect their hearing from noise damage after they were issued by the U.S. military. 3M has said the earplugs work correctly when used with proper training. The earplug litigation has become the largest single mass tort in U.S. history, with more claims than any one company has faced for earlier mass litigation including asbestos exposure, opioid sales or wildfires. (Subscription required.)

Mallinckrodt on Monday disclosed that it faces a grand jury subpoena over sales of controlled substances as it filed for bankruptcy for the second time in three years to reduce by roughly $1 billion its prior pledge to pay compensation for its alleged role in the opioid crisis, the Wall Street Journal reported. Mallinckrodt said that it received the subpoena from the U.S. Attorney’s Office for the Western District of Virginia last week, seeking data and information dating back to 2017 about the company’s reporting of suspicious controlled substances orders, chargebacks and other transactions, as well as communications between the company and the Drug Enforcement Administration regarding those issues. The company said that it is in the process of responding to the subpoena and intends to cooperate in the investigation. It said it believes it is in compliance with its obligations through its compliance program for controlled substances. Mallinckrodt’s disclosure of the subpoena came at the same time that it announced it has initiated chapter 11 proceedings Monday in the U.S. Bankruptcy Court in Delaware, with a plan to hand control to its lenders and cut its outstanding payments to a compensation trust for opioid victims.

Hawaiian Electric said Monday that its power lines weren’t responsible for the wildfire that destroyed the town of Lahaina, killing at least 115 people, and blamed Maui County firefighters for an inadequate response, the Wall Street Journal reported. The company made the statements in a public response to a lawsuit filed last week by Maui County that blamed Hawaiian Electric, the local electric utility known as HECO, for the blaze, and sought damages for costs the local government has incurred. According to HECO, a fire that started early in the morning of Aug. 8 was caused by its power lines that fell in high winds, but that blaze was declared extinguished by firefighters before they left the scene at 2 p.m. HECO workers arrived to make repairs that afternoon and saw no smoke or embers. The utility company said that its power lines had been shut off for more than six hours before its workers, who were in the area to make repairs, saw a new fire shortly before 3 p.m. and called 911 to report it. Local firefighters, who had left after the earlier blaze was extinguished, returned but were unable to contain that second blaze before it spread toward Lahaina, according to HECO. In its lawsuit last week, Maui alleged HECO was negligent in failing to cut power ahead of the windstorm that fanned the flames which leveled the historic town. It also alleged the company failed to properly maintain its system.

Sam Bankman-Fried has appealed a decision to jail him for alleged witness tampering ahead of his Oct. 3 trial over the collapse of his FTX cryptocurrency exchange, Reuters reported. In a filing late on Friday with the U.S. Court of Appeals for the Second Circuit, Bankman-Fried's lawyers said that the 31-year-old former billionaire simply exercised his First Amendment rights by sharing writings by his former colleague and romantic partner Caroline Ellison with a New York Times reporter. Ellison is one of three former members of Bankman-Fried's inner circle expected to testify against him after pleading guilty to fraud. Bankman-Fried's lawyers said he shared her writings to defend his reputation, not to intimidate her. "It is unclear how a cooperating witness who has promised to testify against a defendant could be meaningfully threatened by nothing but their own statements being published by a reputable newspaper," Bankman-Fried's lawyers wrote. In her writings, which predated FTX's November 2022 collapse, Ellison described feeling "unhappy and overwhelmed" with her job and "hurt/rejected" from her breakup with Bankman-Fried. Prosecutors said Bankman-Fried released those writings to harass Ellison and to dissuade others from testifying if they thought he would make them look bad in the press.

Drugmaker Mallinckrodt said today that the company and some of its units have filed for a second bankruptcy in three years in the U.S., with the newest restructuring plan set to reduce its debt by about $1.9 billion, Reuters reported. The Ireland-based company initiated chapter 11 proceedings after reaching a debt reduction deal that would cut $1 billion from the amount it owes to victims of the opioid crisis. The company is one of the largest manufacturers of opioids. It also makes generic and branded drugs such as Acthar Gel, which is used to treat multiple sclerosis and infantile spasms. Mallinckrodt, which had also filed for bankruptcy in 2020, was a defendant in more than 3,000 lawsuits alleging that it used deceptive and misleading marketing tactics to boost its sales of highly addictive opioid drugs. After court approval, the company will have excess of $450 million of liquidity comprising cash, commitments received for $250 million in new financing from certain of its creditors, it said in a statement.

Rite Aid is preparing to file for bankruptcy in coming weeks to address mass federal and state lawsuits the drugstore chain is facing over its alleged role in the sale of opioids, WSJ Pro Bankruptcy reported. The chapter 11 filing would cover Rite Aid’s more than $3.3 billion debt load and pending legal allegations that it oversupplied prescription painkillers. Philadelphia-based Rite Aid hasn’t agreed on a settlement with federal, state government and private opioid plaintiffs to resolve those opioid liabilities in a potential chapter 11 and is currently planning to treat them as general unsecured claims, they said. Unsecured claims rank behind a company’s collateralized debt in bankruptcy and share in the amounts left over after secured claims are paid in full. The terms offered to Rite Aid’s opioid-related claimants in a potential chapter 11 could change. Rite Aid faces more than a thousand federal lawsuits that were consolidated into a multidistrict litigation in Ohio. The company also faces a significant number of similar cases pending in state courts that allege it contributed to the opioid epidemic, as well as a civil lawsuit by the Justice Department that alleges the company dispensed controlled substances in violation of the False Claims Act and Controlled Substances Act.

3M Co. has tentatively agreed to pay more than $5.5 billion to resolve over 300,000 lawsuits claiming it sold the U.S. military defective combat earplugs, Bloomberg News reported. The settlement would avert a potentially much larger liability that 3M sought to curb though a controversial bankruptcy case that ultimately collapsed. The sum is about half the roughly $10 billion some financial analysts predicted 3M could end up paying over allegations that the earplugs didn’t adequately protect the hearing of service members. Bloomberg Intelligence had estimated that the company’s potential liability was as much as $9.5 billion, while analysts at Barclays put it at about $8 billion. The accord would end a torrent of litigation facing the St. Paul, Minnesota, company even as it faces thousands of other lawsuits over PFAS “forever chemicals” likely to cost several times more than the earplug deal to resolve. 3M has lost 10 of 16 early trials over the earplugs so far, with over $250 million awarded to more than a dozen service members. In the most recent trial, a Florida jury ordered the manufacturer in 2022 to pay a U.S. Army veteran James Beal $77.5 million in damages over his hearing loss from the earplugs. Beal, who tested weapons over a four-year period starting in 2005, said he developed hearing loss and tinnitus, a buzzing or hissing sensation in the ears.

Shares of Hawaiian Electric Co.'s parent fell more than 18% by market close Friday, one day after the utility was sued by Maui County over the fires that devastated Lahaina earlier this month, the Associated Press reported. Maui County accused Hawaiian Electric of negligently failing to shut off power despite exceptionally high winds and dry conditions — saying that the destruction from the deadly Aug. 8 fires could have been avoided if the company had taken essential actions. Outrage towards Hawaiian Electric grew as witness accounts and video indicated that sparks from power lines ignited fires as utility poles snapped in the winds, which were driven by a passing hurricane. In the weeks since the fires — which killed at least 115 people and left an unknown number of others missing — broke out, Hawaiian Electric Industries Inc.'s market capitalization has fallen from $4.1 billion to $1.1 billion. Late Thursday, the company said that it would suspend its quarterly dividend of 36 cents per share, starting in the third quarter, in order to improve its cash position. In a Friday report, analysts at Wells Fargo said that Hawaiian Electric is “potentially under severe financial duress” and “could face a future liquidity event” — pointing to the company's struggles to bring in external funds, recent downgrading of credit ratings from the S&P, as well as the costs of normal operating expenses and an upcoming $100 million debt maturity for the utility.

At the heart of embattled Hawaiian Electric Industries is an asset that stands to complicate the company’s already difficult road to recovery after the fatal wildfires in Maui: a bank that is the third-largest in the state, the Wall Street Journal reported. American Savings Bank, which Hawaiian Electric Industries bought in 1988, is a remnant of the holding company’s onetime expansion across industries and continents. Now, as Wall Street games out what the future of the broader company might look like, the bank might be its most valuable asset. Wells Fargo estimates American Savings Bank’s value at about $8 a share, equivalent now to more than 60% of the broader company’s current share price. Analysts say they believe the financial institution is walled off from legal liabilities its parent might face from class-action lawsuits but warn that a potential bankruptcy could make that outlook more uncertain. Maui County yesterday sued the utility company alleging its power lines caused the deadly wildfires on the island.