Asbestos-injury plaintiffs have made a plausible case that French multinational Saint-Gobain’s CertainTeed unit defrauded them when it pushed its mass asbestos liabilities into chapter 11, a bankruptcy judge ruled, WSJ Pro Bankruptcy reported. Judge Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C., said on Thursday that personal-injury lawyers had made sufficient allegations to support a claim that Compagnie de Saint-Gobain SA and its CertainTeed LLC materials division hindered the rights of asbestos victims. A CertainTeed spokesman said it believes the allegations have no merit and will defend its position vigorously. CertainTeed and several other large, profitable companies have used a Texas corporate law in recent years to move mass asbestos liabilities into bankruptcy, isolated within corporate subsidiaries that have no other business operation. Plaintiffs’ lawyers have challenged the tactic, known as the Texas Two-Step, saying that it lets companies access the protections of chapter 11 without placing business assets in a value-destroying bankruptcy. Judge Whitley on Thursday declined to dismiss a challenge to CertainTeed’s prebankruptcy reorganization, saying the allegations from plaintiffs’ lawyers put forth a plausible claim for relief.
A bankruptcy judge said he would consider appointing an independent expert to assist in evaluating the mass claims linking Johnson & Johnson’s talc-based baby powder to cancer, WSJ Pro Bankruptcy reported. Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey on Wednesday floated the idea of appointing an outside expert to help him wade through legal, financial and scientific questions around allegations that J&J’s talc products contained asbestos and caused ovarian cancer. Personal-injury lawyers and the healthcare company disagree about how much those tort claims are worth. J&J has denied that its baby powder was unsafe but moved its talc-related liabilities into chapter 11 in October to drive a settlement of roughly 40,000 pending talc cases as well as future injury claims. J&J created subsidiary LTL Management LLC to carry those or the company’s talc liabilities into chapter 11, keep its consumer-health business out of bankruptcy and freeze lawsuits in place. Plaintiffs’ lawyers have decried the bankruptcy filing, saying it will deny injury claimants their constitutional right to a jury trial. J&J has said that victims can be compensated more quickly and efficiently in a chapter 11 plan than through costly litigation in the tort system. Judge Kaplan agreed with J&J in February that the chapter 11 was filed in good faith and for a valid reorganizational purpose. A federal appeals court is now reviewing those findings. Meanwhile, mediated talks are continuing, though both sides appear to be at an impasse regarding a settlement proposal mediators have put forth, according to Judge Kaplan, who said he was considering how to move the process forward and encourage a resolution.
A federal judge has ruled that the nation’s three largest drug distributors cannot be held liable for the opioid epidemic in one of the most ravaged counties in the country — a place where 81 million prescription painkillers were shipped over eight years to a population of less than 100,000, the New York Times reported. Judge David A. Faber of the U.S. District Court for the Southern District of West Virginia released the opinion on the July 4th holiday, almost a year after the end of a trial pursued by the city of Huntington and Cabell County, which were the focus of an Oscar-nominated documentary called “Heroin(e)” about the effect of the prescription painkillers. The fatal overdose rate in Cabell County increased to 213.9 from 16.6 per 100,000 people, from 2001 to 2017, according to the ruling. In absolving the drug distribution companies — AmerisourceBergen, McKesson and Cardinal Health — Judge Faber acknowledged the terrible cost on the county and the city, but added that “while there is a natural tendency to assign blame in such cases, they must be decided not based on sympathy, but on the facts and the law.” His decision points to the difficulty of determining responsibility for a decades-long disaster in which many entities had a role, including drug manufacturers, pharmacy chains, doctors and federal oversight agencies, as well as the drug distributors. Drug distributors generally fulfill pharmacy orders by trucking medications from the manufacturers to hospitals, clinics and stores, and are responsible for managing their inventory. Like other companies in the drug supply chain, distributors are supposed to comply with federal limits established for controlled substances like prescription opioids, and have an internal monitoring system to detect problematic orders. Lawyers for the city and county argued that the distributors should have investigated orders by pharmacies that requested addictive pills in quantities wildly disproportionate to the population in these small communities. But Judge Faber ruled: “At best, distributors can detect upticks in dispensers’ orders that may be traceable to doctors who may be intentionally or unintentionally violating medical standards. Distributors also are not pharmacists with expertise in assessing red flags that may be present in a prescription.”
The U.S. Justice Department told a federal appeals court that Johnson & Johnson's strategy for moving talc injury litigation to chapter 11 violates the regime Congress has authorized for litigating mass torts, MarketWatch.com reported. The U.S. Trustee Program, a Justice Department unit monitoring bankruptcy courts, said in a Thursday filing with the U.S. Court of Appeals for the Third Circuit that Johnson & Johnson's decision to put a newly formed subsidiary into chapter 11 to drive settlements of talc litigation circumvented federal multidistrict litigation procedures which have been prescribed by Congress as the way to deal with mass torts. Johnson & Johnson used an emerging restructuring transaction called a Texas divisive merger to send the talc liability to the subsidiary before it filed bankruptcy, a strategy that will be scrutinized by the appeals court. The U.S. Trustee and talc injury claimants want the Third Circuit to reverse a bankruptcy judge who authorized the Johnson & Johnson talc subsidiary to stay in chapter 11.
A law firm's representation of two insurance companies in an asbestos-coverage case did not disqualify a partner in the firm from opposing the same insurers in the Imerys Talc America bankruptcy case, a federal appeals court held on Thursday, Reuters reported. The U.S. Court of Appeals for the Third Circuit upheld the appointment of Young, Conaway, Stargatt & Taylor’s James Patton as the Future Claimants’ Representative (FCR) in the talc case, over the objections of CNA’s Continental Casualty and AIG’s National Union Fire Insurance Co. The decision resolves a longstanding split in the lower courts about who is qualified to serve as an FCR. The 3rd Circuit agreed with the insurers that the bar should be set high. An FCR “must be more than merely disinterested, and instead be able to fulfill the heightened duties owed by fiduciaries,” Circuit Judge Cheryl Ann Krause wrote. However, the panel also found that the bankruptcy judge had properly applied that standard in appointing Patton. “The decision is important because it is the first by a Court of Appeal to recognize that the fiduciary duty standard … applies to future claimants’ representatives in mass tort cases,” an attorney for the insurers, Tancred Schiavoni of O’Melveny & Myers, wrote in an email. The high standard will “contribute to reform” of the FCR’s role, he said. In a statement, Imerys Talc America said it was pleased with the result, which “maintains stability in the case.” The parties are currently in mediation, after the debtor’s reorganization plan failed to get enough votes for confirmation last fall.
Madison Square Boys & Girls Club, which operates six youth centers in New York City, told a bankruptcy judge on Friday that it intends to use its chapter 11 case to mediate more than a hundred sexual abuse claims involving a doctor who volunteered at the centers decades ago, Reuters reported. Madison Square, which filed for chapter 11 protection in New York on Thursday, told U.S. Bankruptcy Judge Sean Lane at a Friday hearing that a bankruptcy mediation is the only way to bring sexual abuse claimants and insurers to the negotiating table before the nonprofit runs out of funds. "We're here to fairly and equitably compensate survivors of what they describe as hideous sexual abuse that took place many years ago at Madison's former premises," attorney Alan Kornberg said. Without bankruptcy protections, the 138-year-old youth organization would likely run out of money in 60 days and be forced to liquidate, Kornberg said. Nearly all of the abuse claims stem from the conduct of a single doctor, Reginald Archibald, who volunteered at Madison from the 1940s to the 1980s. Archibald, who died in 2007, also worked as a pediatric endocrinologist at Rockefeller University Hospital, which revealed Archibald’s history of sexual misconduct in a 2018 investigation.
A controversial $148 million settlement offer in the Diocese of Rochester, along with recent deals of $87.5 million and $121.5 million, respectively, in bankruptcy cases in the Diocese of Camden, N.J., and Archdiocese of Sante Fe, N.M., give glimpses into where mediated negotiations might be heading for the Buffalo Diocese, its parishes and schools and more than 900 people who have filed sex abuse claims with a federal court, the Buffalo News reported. Nearly 2½ years after a flood of Child Victims Act lawsuits prompted the Buffalo Diocese to file for chapter 11 bankruptcy protection, attorneys indicated this week that they are still at least several months from being able to reach a deal compensating abuse victims. “By no means can I say the case is going to settle, but I think we are literally getting into the meat of it, so to speak,” lead diocese bankruptcy attorney Stephen A. Donato told a federal judge this week. Donato said that it will take an “absolute minimum of four to five months” to have a clearer picture of whether mediated negotiations ordered by Chief Judge Carl L. Bucki of the U.S. Bankruptcy Court in the Western District of New York in February will yield results. The diocese has met twice in person to negotiate with a creditors committee that represents abuse victims. “We are still at the initial stages where I think we’re all optimistic that we’ll make further progress,” said Ilan D. Scharf, lead attorney for the creditors committee.
Endo International PLC said Thursday that it has elected not to make a $38 million payment owed to its bondholders as the drug producer contends with declining earnings and thousands of lawsuits alleging it fueled the opioid crisis, WSJ Pro Bankruptcy reported. Endo is continuing discussions with creditors regarding its evaluation of strategic alternatives, the company said, and has entered a 30-day period before its failure to make the payment would constitute an event of default. Endo, which faces about 3,500 lawsuits from state and local governments and healthcare providers, has been warning of the risk of a bankruptcy filing in its regulatory disclosures since last year. While Endo has reached settlements with a handful of state and local governments over opioid liabilities, the vast majority of outstanding lawsuits have not been resolved. The company has denied wrongdoing in connection with its sales of its Opana opioid, which it stopped selling in 2017. In addition to the litigation that Endo faces, the company is also suffering from declining earnings, in part driven by the loss of exclusivity for a key drug, Vasostrict. The company’s debt load amounts to more than $8 billion. On Monday, a group of junior bondholders publicly urged Endo not to file for bankruptcy, saying there are several possible transactions, such as a bond swap, that would enable Endo to restructure its obligations outside of chapter 11. Endo, which is domiciled in Ireland following a 2014 corporate tax inversion and has operations in Malvern, Pa., on Thursday said that its decision to miss the interest payment is not driven by liquidity constraints, as it had approximately $1.4 billion in cash as of March 31.
