%1

OxyContin maker Purdue Pharma LP spent years building a restructuring plan to settle thousands of lawsuits and deliver funding to combat the opioid crisis. That plan is in limbo after a federal judge ruled that a deal the company struck with its owners isn’t allowed under the law, WSJ Pro Bankruptcy reported. After U.S. District Judge Colleen McMahon’s ruling last week overturning a roughly $4.5 billion settlement between the OxyContin maker and members of the Sackler family who own the company, Purdue, once on the verge of settling an onslaught of lawsuits over its flagship opioid painkiller, will remain in bankruptcy court as it attempts to salvage a settlement that took years and hundreds of millions of dollars to craft. Billions of dollars that Purdue and the family had agreed to pay are now on hold, jeopardizing payouts expected by the people injured by OxyContin overuse and for programs to combat the worsening opioid epidemic. The company so far has spent more than $548 million in fees for lawyers, and other professionals advising the company and creditor groups, according to court papers filed earlier this month. Purdue said in papers filed on Monday in the U.S. Bankruptcy Court in White Plains, N.Y., that although Judge McMahon’s ruling is a “significant setback,” the company believes it has a good chance to win on an appeal.

A group of insurers in the Boy Scouts of America bankruptcy got court approval to delay the start of the hearing on whether to approve the youth group's proposed chapter 11 plan, MarketWatch.com reported. The confirmation hearing will now begin Feb. 22 instead of Jan. 24. The youth group had opposed the delay, saying it would further deplete financial resources that otherwise could go toward sexual abuse survivors. Insurers including Travelers, AIG and Allianz said they needed more time to complete discovery and prepare confirmation objections. Judge Laurie Selber Silverstein in the U.S. Bankruptcy Court in Wilmington, Del., yesterday granted the request, saying several depositions still need to be taken and other work done in an evolving case.

Non-consensual releases of creditors’ direct claims against a debtor are not permitted by the Bankruptcy Code, according to District Judge Colleen McMahon of Manhattan, who vacated the bankruptcy court’s confirmation of the controversial Purdue Pharma LP chapter 11 plan, according to today's Rochelle's Daily Wire column. Had the reorganization plan been upheld (or if it is upheld after appeal to the Second Circuit), the controlling Sackler family’s $4.325 billion contribution to the reorganization plan would have absolved them from all liability stemming from the opioid crisis, even if creditors with direct claims did not consent. Judge McMahon’s 142-page decision on December 16 is perhaps the most outstanding and remarkable bankruptcy opinion of the decade. Unless reversed on appeal, she will have barred debtors from confirming chapter 11 plans in the Second Circuit with non-consensual releases of creditors’ direct claims against non-debtor third parties. Contrary to what may have been reported in the press, Judge McMahon did not prohibit all non-debtor releases, nor did she bar members of the Sackler family from obtaining releases from perhaps the majority of opioid claims. Judge McMahon’s opinion is narrow. She only barred non-consensual releases where creditors have direct claims against the Sacklers that are not derivative of claims that the company has against family members.

The Archdiocese of Santa Fe’s (N.M.) chapter 11 bankruptcy efforts have plodded along for three years with no end visible in the case involving more than 400 clergy abuse victims, Santa Fe Mexican reported. Lawyers say three years is a comparatively long time for chapter 11 proceedings but is far from unheard of. It’s in everyone’s interests — the archdiocese’s and the victims’ — to resolve it through chapter 11, attorneys say. Therefore, an eventual settlement is still expected. “The alternatives are so bad that it’s worth it to stay in the game,” Laura Coordes, associate professor of law at Arizona State University, said of chapter 11. The archdiocese seeks to raise an adequate sum, through property sales, donations and insurance, to reach settlements with the victims. In a blog this month, Archbishop John Wester wrote: “We knew when we filed for chapter 11 that it would not be easy. We are making progress, albeit slow progress. Please pray that this arduous and drawn-out process will bring healing to the victims of sexual abuse, to their families, our parishes and this local Church.” Coordes and Albuquerque bankruptcy attorney Dave Giddens said the alternatives to a settlement typically would be for the case to be converted to chapter 7 bankruptcy, in which a trustee would call the shots on the sale of assets. Or the case could be dismissed, and many victims then would file lawsuits individually.

U.S. District Judge Colleen McMahon in Manhattan overturned a roughly $4.5 billion settlement between OxyContin maker Purdue Pharma LP and members of the Sackler family who own the drugmaker, a surprising decision that raises questions about the future of the company and its owners, who have been accused of fueling the nation’s opioid crisis, the WSJ Pro Bankruptcy reported. Judge McMahon ruled late yesterday that the legal releases that would shield members of the Sackler family from civil opioid lawsuits are not permitted under the Bankruptcy Code. A handful of state attorneys general and the Justice Department’s bankruptcy watchdog challenged the releases, which would have extinguished the states’ potential legal claims against the Sacklers even though they didn’t support the deal. Such settlements have been used in other large corporate bankruptcies, though Congressional Democrats introduced a bill earlier this year in response to the Purdue settlement that would ban these types of releases. The decision is likely to result in further appeals from Purdue, the Sacklers and groups representing opioid victims and other company creditors who supported the settlement and broader reorganization plan. Judge McMahon said that prior legal rulings from the Second U.S. Circuit Court of Appeals that Purdue and other bankrupt companies have relied on in advancing the types of legal releases the Sacklers would receive haven’t properly analyzed the issue. She said that her ruling Thursday won’t be the last word on the issue. “It must be put to rest sometime; at least in this Circuit, it should be put to rest now,” Judge McMahon said. The family settlement was the centerpiece of a larger financial restructuring of Purdue designed to fund programs to fight the opioid crisis and compensate people harmed by OxyContin. State attorneys general from Washington, Connecticut, Maryland and other states had objected to the settlement, arguing the Sacklers’ contribution was insufficient to deter other corporate wrongdoing. Read more. 

Click here for a copy of the decision. 

An attorney for the Diocese of Norwich (Conn.) told a federal bankruptcy court judge on Wednesday that it expects to file a proposed bankruptcy plan by April 1 to resolve claims by at least 70 people who say they were sexually assaulted by priests and employees affiliated with the diocese, The Day reported. During the remote hearing before Judge James Tancredi, attorneys for both the Roman Catholic diocese and the committee that represents the claimants also agreed to a plan that temporarily would limit the large sums of money being spent by the diocese on legal and financial services fees. Over the past few months attorneys for the alleged victims — as well as Tancredi — have expressed concern that the millions of dollars in fees will reduce the money that eventually will be available to distribute to the victims. The diocese filed for chapter 11 bankruptcy in July as it faced more than 60 lawsuits filed by young men who charge they were sexually assaulted as boys by Christian Brothers and other staff at the diocese-run Mount Saint John Academy in Deep River from 1990 to 2002. Mount Saint John was a residential school for troubled boys whose board of directors was headed by retired Bishop of Norwich Daniel Reilly. Since then, additional people whose sexual assault allegations involved not only Mount Saint John but diocesan churches have filed claims in the bankruptcy case. Victims have until March 15, 2022, to file claims.

The U.S. Supreme Court yesterday declined to hear a bid by Johnson & Johnson to throw out a lawsuit brought by the state of Mississippi over allegations that the company failed to inform residents that its talc-based products increased the risks of developing ovarian cancer, Reuters reported. The justices left in place an April ruling by the Mississippi Supreme Court that let the lawsuit move forward. In the case being pursued by Mississippi Attorney General Lynn Fitch, the state argues that J&J should have included a warning on its label for baby powder and other talc products about the risk of ovarian cancer. The U.S. Food and Drug Administration said in 2014 that no such label was required and the company has said that decision preempts state lawsuits like Mississippi's. In October, J&J put into bankruptcy tens of thousands of legal claims alleging its talc-based products caused cancer, offloading the potential liabilities into a newly created subsidiary. J&J said that the talc cases would be halted while the new entity saddled with J&J's talc liabilities navigates bankruptcy proceedings. Mississippi disagreed, telling the justices not to condone the company's "effort for further delay."

USA Gymnastics, U.S. Olympic & Paralympic Committee and their insurers have agreed to fund a $380 million settlement with victims of longtime national team physician Larry Nassar, drawing to a close a five-year legal battle that has upended American Olympic sports governance, the Wall Street Journal reported. The sum is among the largest ever recorded for victims of sex abuse and includes hundreds of athletes who were assaulted over three decades. The decision by the final holdout insurer, TIG Insurance Company, to pay a substantial share of the settlement was confirmed Monday in a hearing in bankruptcy court in Indianapolis. The settlement also includes a direct contribution from the USOPC of around $34 million and a $6 million loan from the USOPC to USA Gymnastics to contribute, as well. The settlement will include claims from Olympic gold medalists such as Simone Biles, Aly Raisman and McKayla Maroney, who were treated by Nassar during his time as the U.S. women’s squad doctor. It also includes gymnasts competing for local clubs who sought treatment from Nassar on the strength of his national reputation, and a handful of victims of abusive coaches who had been pursuing claims against the sport’s governing bodies.

A New York judge expressed skepticism about the state’s attempt to dissolve the National Rifle Association over decades of financial malfeasance, asking why the matter couldn’t be resolved in a way that would “preserve an entity of this vintage,” Bloomberg News reported. “The question is why can’t the two be separated?” Manhattan state court judge Joel M. Cohen asked at a Friday hearing over an NRA request to dismiss the state’s suit against the 150-year-old organization. “Why can’t you address the financial issues without dissolving the entire entity?” New York Attorney General Letitia James sued the NRA late last year alleging it violated state laws governing charitable organizations by using donated funds to enrich longtime leader Wayne LaPierre and other executives. James’s suit was filed after an investigation revealed what the state described as rampant misuse of donated funds on luxury expenses for NRA leadership. The NRA’s attempt to avoid the lawsuit by filing for bankruptcy failed after a Texas judge called the chapter 11 case a misuse of the law.