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Lawyers for the Boy Scouts of America are scrambling to mitigate potential damage they say was caused by an “inflammatory” email sent to thousands of men who say they were sexually abused by troop leaders ahead of a key deadline in the youth organization’s bankruptcy, Reuters reported. U.S. Bankruptcy Judge Laurie Selber Silverstein in Delaware said during a virtual hearing on Friday that she thinks the email distributed by lawyers for the official committee representing survivors in the bankruptcy may constitute "a breach of professional ethics." The email, authored by plaintiffs’ lawyer Tim Kosnoff, urged survivors to vote against the Boy Scouts of America (BSA) reorganization plan, which rests on a proposed settlement of more than 80,000 sex abuse claims. It also included what BSA described as attacks on other lawyers in the case and inaccurate statements about the plan. BSA's lawyers said the email could have “disastrous effects” by confusing survivors and tainting their votes on the plan, which are due Dec. 14. The organization needs the votes to settle the claims and exit bankruptcy.

135-year-old company Johnson & Johnson is joining a growing roster of iconic American businesses that are splitting up as they seek to please restive shareholders and move past recent controversies, the New York Times reported. Johnson & Johnson on Friday announced plans to spin off its consumer-products division — famous for household-name but not-very-lucrative brands like Tylenol, Band-Aid and Neutrogena — into a separate company. Johnson & Johnson will keep its more profitable, faster-growing businesses in pharmaceuticals and medical devices. The planned breakup comes after years of tribulations for Johnson & Johnson. The company is juggling lawsuits for its role in the opioid epidemic and over accusations that the talc once used in its baby powder had caused cancer in some customers. Even the company’s single-shot COVID-19 vaccine, once expected to be widely used around the world, has fallen far short of its promise because of production problems and fears about rare side effects. Johnson & Johnson, with headquarters in New Jersey, is part of a parade of once-proud companies that have recently unveiled plans to break themselves up or radically shrink. This week alone, the industrial conglomerates General Electric and Toshiba announced that they would split up. In recent years, pharmaceutical companies including Merck, Pfizer and GlaxoSmithKline have also shed or reorganized their consumer-products operations to focus on businesses, in particular drugs, that enjoy fatter profit margins.

A U.S. judge is expected to announce on Wednesday whether Johnson & Johnson must continue defending against tens of thousands of claims that its baby powder and other talc-containing products caused mesothelioma and ovarian cancer, Reuters reported. The pharmaceutical giant is banking on a ruling that would halt ongoing litigation as part of its legal strategy of shifting its talc liabilities onto a newly-created subsidiary, and placing that entity into bankruptcy. J&J, which has maintained that its talc products are safe, has already spent nearly $1 billion defending itself in talc-related lawsuits. Settlements and verdicts have cost it about $3.5 billion more, although it has prevailed in some of the cases. U.S. Bankruptcy Judge Craig Whitley is expected to rule in a hearing of the chapter 11 bankruptcy case of the new J&J entity, LTL Management LLC, in Charlotte, North Carolina. LTL has asked Judge Whitley to extend protection against litigation that is typically given to bankrupt entities to the non-bankrupt parent company. LTL has argued that allowing litigation to continue against J&J will defeat the purpose of the bankruptcy, which would allow the company to consolidate and resolve all of the roughly 38,000 talc-related claims. Some of the plaintiffs suing J&J, however, argue that it should not be able to reap the benefits of bankruptcy protection without filing for bankruptcy itself and that halting litigation will prevent them from having their day in court. One major case that has been pending for five years is on the verge of trial.

Unsealed emails reveal the role baby powder-maker Johnson & Johnson played in a report that an industry group submitted to U.S. regulators deciding whether to keep warnings off talc-based products linked to cancer, Bloomberg News reported. The emails -- unsealed in the state of Mississippi’s lawsuit against J&J over its refusal to add a safety warning -- show that J&J and its talc supplier chose the scientists hired by their trade association, the Personal Care Products Council, to write the 2009 report assessing talc-based powders’ health risks. They also show that the researchers changed the final version of their report at the companies’ behest. The U.S. Food and Drug Administration said that it relied in part on the report in its decision to forgo a warning for the product. The emails among executives of J&J and Rio Tinto Minerals, its supplier at the time, provide a behind-the-scenes glimpse of dealings between companies and their industry group that successfully fended off a cancer warning on talc-based powders for nearly 40 years. Now, almost 39,000 users and their families are suing J&J, most claiming their ovarian cancers and those of loved ones were linked to asbestos, the potent carcinogen in the products, which were pulled from U.S. and Canadian shelves in May 2020.

Mallinckrodt Plc filed for bankruptcy last year to resolve thousands of lawsuits accusing it of fueling the opioid epidemic, but as it aims to bring the process to a close, it must first address a completely different kind of claim, Reuters reported. The pharmaceutical company recently kicked off a multi-day hearing seeking approval of its proposed reorganization plan and underlying opioid litigation settlement, which creditors and government entities have largely signed off on. But now, in what one Mallinckrodt attorney called an “unconventional” approach to a chapter 11 plan confirmation process, the company will begin another hearing on Monday over two insurers’ claims that they have had to reimburse their customers at highly inflated prices for Mallinckrodt’s Acthar gel. The product, one of the company's main moneymakers, is used for treatment of infantile spasms and multiple sclerosis. The insurers, Humana Inc. and Attestor, allege that not only did Mallinckrodt engage in anti-competitive practices by inflating Acthar's prices before the bankruptcy in violation of antitrust laws, but that it has continued charging those high rates during the case. The insurers argue that since they have had to continue paying amounts they believe are illegal, they should be entitled to senior priority status in Mallinckrodt’s creditor payment structure.

Johnson & Johnson is seeking to revive its strategy for resolving tens of thousands of lawsuits alleging its baby powder caused ovarian cancer and other health problems in women, Bloomberg News reported. A federal judge opened a two-day trial in Charlotte, N.C., on Thursday to decide whether to temporarily halt 38,000 lawsuits aimed at J&J and about 250 retailers and insurance companies. Stopping the suits is a key part of J&J’s strategy to pay at least $2 billion to end all current and future claims related to baby powder and other talc-based products. To do so, J&J executed a legal strategy known as the Texas Two Step, creating a unit in Texas to hold all of the lawsuits, then transferring that unit to North Carolina and placing it in bankruptcy. The move angered lawyers for alleged baby powder victims, who say J&J is trying to block cancer victims from having their day in court. The lawsuits against J&J’s bankrupt unit, LTL Management, have already been halted as part of standard chapter 11 bankruptcy rules. It also caught the attention of Congress. The House Judiciary Committee voted on Wednesday to advance a bill banning the strategy.

The House Judiciary yesterday favorably reported (23-17) H.R. 4777, the "Nondebtor Release Prohibition Act of 2021," introduced by House Judiciary Chair Jerrold Nadler (D-N.Y.), out of committee. The legislation now goes to the full House of Representatives, where the timeline for consideration by the full chamber is unclear. Nadler, in a press release, said that the legislation would limit tactics known as nondebtor stays and injunctions, which allow a nondebtor to avail itself of the "benefits of the bankruptcy process without assuming the obligations and procedural safeguards associated with bankruptcy." Under the bill, nonconsensual preliminary stays and injunctions could only last up to 90 days. "Finally, the legislation limits the use of so-called 'divisional mergers' — which allow a corporation to shield its assets from its victims and other creditors." Republicans on the House Judiciary Committee objected the proposal, according to WSJ Pro Bankruptcy, saying during the mark-up hearing yesterday that the bill might impair companies’ ability to restructure significant liabilities in chapter 11 or restrict judges’ flexibility in ultimately deciding if a troubled company can be revived and jobs preserved. The Senate Judiciary has not considered the Senate companion bill (S. 2497 introduced by Sen. Elizabeth Warren (D-Mass.)), and the proposal still faces challenges given the slim majorities in the House and Senate.

Click here to read the full text of the bill. 

Click here to read Nadler's press release. 

The Boy Scouts of America’s push to settle sex-abuse claims from 82,200 men has touched off lobbying campaigns by plaintiffs’ lawyers who disagree on whether victims should back a compensation plan that could be the organization’s ticket out of bankruptcy, the Wall Street Journal reported. Abuse victims across the country are debating whether the $1.9 billion settlement offer is fair compensation for lives affected by childhood trauma, as lawyers on different sides of the issue have given conflicting information on what they can expect to receive. One group of lawyers told victims they could receive as much as $2.7 million for the worst abuses, while another estimated that the highest payout would be no more than $58,000. Mario Fernandez, who said he was abused more than 100 times by three different Boy Scout leaders when he was between 8 and 16 years old at a camp in New Jersey, is following his lawyers’ advice and plans to vote against the Scouts’ offer. The law firm representing Fernandez, Pfau Cochran Vertetis Amala, set up a calculator on its website that shows the maximum that victims of the worst abuses — including repeated rapes — can expect to get is about $58,000. The calculator factors in the type of abuse suffered, with choices ranging from “non-touching” to “penetration,” and the state where the incidents occurred. The $2.7 million figure assumes that plaintiffs will get paid the full value of their claims, when in reality there is likely to only be enough money from settlements to date to pay at most 10% of the full value, Jason Amala of PCVA said.