Mallinckrodt PLC has begun defending its chapter 11 exit plan, a proposal that would reduce its debt and settle litigation the company faces over its production of opioids for roughly $1.72 billion, WSJ Pro Bankruptcy reported. A trial addressing the drugmaker’s chapter 11 reorganization plan opened Monday in the U.S. Bankruptcy Court in Wilmington, Del. Mallinckrodt sought court protection early last year with the framework of a deal already in hand to resolve its opioid liabilities. The trial could last several weeks. Financial advisers hired by Mallinckrodt were questioned yesterday about business projections and other metrics underpinning the restructuring plan. The value of the company once it leaves chapter 11 is projected to be between about $5.2 billion and $5.7 billion, court papers say. Dublin-based Mallinckrodt is among a handful of drugmakers that turned to bankruptcy recently to resolve a deluge of lawsuits over the opioid epidemic. As with other drugmakers that have sought chapter 11, settlement funds would be used to combat opioid addiction, which increased during the COVID-19 pandemic. Mallinckrodt is also seeking to settle liability over pricing for its H.P. Acthar Gel drug, which costs roughly $38,000 a vial and is used treat infantile spasms, multiple sclerosis and other conditions.
PG&E Corp said yesterday that it had received a subpoena from the U.S. attorney's office seeking documents from the Californian utility related to the Dixie Fire, and expects to take a loss of $1.15 billion from the blaze this year, Reuters reported. The company, in a regulatory filing, said it received the subpoena on Oct.7. The so-called Dixie, ranked as the second-largest California wildfire on record, scorched through Northern California communities and forests in early August, forcing thousands to flee from their homes and prompted precautionary power shutdowns. The cause of the Dixie fire remains under investigation. PG&E had said the blaze may have started when a tree fell onto one of the utility's power cables. The company emerged from bankruptcy last year. It had sought protection from creditors after wildfires sparked by its equipment in 2017 and 2018 drove the utility's potential liabilities into tens of billions of dollars. The company had said in July it would bury 10,000 miles of power lines in high-risk fire zones as a safety measure after its equipment caused multiple destructive wildfires over several years.
A unit of French advertising company Publicis Groupe SA on Friday lost a bid to dismiss a lawsuit by Massachusetts' attorney general claiming it helped OxyContin maker Purdue Pharma LP fuel the U.S. opioid epidemic, Reuters reported. Publicis Health had called Attorney General Maura Healey's lawsuit an unprecedented attempt to sue an advertising agency over a manufacturer's marketing of its products. It called her allegations conclusory and said she mischaracterized documents. But Suffolk County Superior Court Judge Brian Davis said Healey brought "non-speculative" claims under the state's public nuisance law and consumer protection statute that could move forward. He pointed to allegations in Healey's complaint, filed in May, that he said showed Publicis "played an integral part in developing marketing strategies" to boost opioid sales from 2010 to 2019. Davis said those marketing campaigns were designed to get doctors "to use more OxyContin, prescribe higher doses and prescribe it for longer periods of time for patients." Healey said she was pleased Davis "rejected Publicis' attempt to skirt responsibility for its marketing campaigns."
A bankruptcy judge refused an initial bid to pause talc litigation against Johnson & Johnson, setting the stage for a November hearing that will likely scrutinize the corporate maneuvering the company undertook to try to settle thousands of personal-injury lawsuits through a subsidiary’s chapter 11, WSJ Pro Bankruptcy reported. Judge J. Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C., on Friday refused to extend to J&J a temporary restraining order that would have halted lawsuits against the consumer-goods giant during the two-week period before next month’s hearing. Instead, the personal-injury lawsuits will only be paused against the newly formed J&J subsidiary that was put into chapter 11 earlier this month and its corporate predecessor, the judge said during a hearing. The ruling effectively limits, at least until early November, the scope of the J&J subsidiary’s bankruptcy stay, a powerful legal tool that immediately halts all lawsuits against a company when it files chapter 11. The J&J subsidiary, called LTL Management LLC, is arguing that its stay should also include its parent company—even though it is not in chapter 11 — because they both have coverage rights under shared insurance policies and because the two corporate entities, though distinct, are “inherently intertwined” by the same talc-injury claims.
USA Gymnastics cleared another hurdle in its bankruptcy plan that would pay $400 million to sexual abuse survivors of team doctor Larry Nassar and insurance companies, Courthouse News reported. Bankruptcy Judge Robyn Moberly approved the organization's disclosure statement yesterday in the third hearing this month on the matter, after all objections to the plan or the method of approval were either resolved or held to be brought forth at a later date. “Based on the fact that there are no objections at this point to the disclosure statement or the proposed procedures for solicitation, we will approve both of them as motions,” Judge Moberly said. The proposed plan is a joint effort between USA Gymnastics and a court-appointed committee that represents sexual abuse survivors and aims to settle current and future claims related to Nassar and others connected to the organization who abused young girls. Under the plan, the more than 500 abuse survivors would receive payments from the settlement fund, and a reserve fund would be created to set aside money for future claims that surface over the next five years. The $400 million figure is far greater than the previously rejected offer of $215 million and less than the $500 million Nassar’s former employer, Michigan State University, agreed to pay survivors. Besides monetary compensation, the proposed plan also offers a pathway for USA Gymnastics to make itself a safer organization going forward. This includes a new "safe sport policy" to establish safety standards and accountability for its gymnastics clubs. The plan also calls for a streamlined process for athletes to report violations of the organization's policies, which includes an online portal where reports of misconduct can be filed. Now that the disclosure statement has been approved, creditors of USA Gymnastics will begin voting on the plan, with ballots due by Nov. 29. A report on the vote would be issued on Dec. 2, with final confirmation hearings set for Dec. 13 and 14.
A federal bankruptcy judge has again blocked 36 people who say they were sexually abused from pressing ahead with Child Victims Act lawsuits against Catholic parishes and schools, the Buffalo (N.Y.) News reported. Chief Judge Carl L. Bucki of the U.S. Bankruptcy Court in the Western District said in a written ruling this week that allowing the state litigation to move forward “would become an inherent distraction that promises to complicate negotiations” among the parties involved in the Diocese of Buffalo bankruptcy reorganization. Judge Bucki agreed with the diocese’s request to extend an injunction prohibiting litigation by 36 plaintiffs against parishes and schools until next August. He also ruled that the plaintiffs were free to continue litigating against individuals who may have abused. The diocese’s lawyers had argued that if any CVA cases against parishes and schools advanced in the state courts, it would inevitably involve the diocese in costly litigation and drain assets that otherwise would be used in settling with childhood sex abuse victims. Judge Bucki acknowledged that the diocese’s bankruptcy case was “extremely complicated,” with more than 900 people seeking damages for abuse claims and continuing litigation within the proceedings over the scope of insurance coverage for more than 5,000 policies issued by at least 70 carriers.
Bankruptcy Judge Craig Whitley sided with lawyers for more than 38,000 people who have sued J&J over claims one of the company’s most recognized products caused cancer and other health problems. The ruling, over whether the lawsuits can continue during bankruptcy proceedings, is just the opening move in what is likely to be a long court fight, Bloomberg News reported. Judge Whitley rejected J&J’s request for a temporary pause in the cases. But he will consider giving J&J a longer-term shield early next month when the parties come back for a hearing in which the company may be able to offer more evidence to support its position. “It is troubling we can’t find agreements” that back up J&J’s claims, Judge Whitley said during a hearing in Charlotte, North Carolina, on Friday. J&J was unable to find key documents that could prove a corporate restructuring in late 1978 moved responsibility for older talc claims away from the parent. After the number of lawsuits claiming harm from J&J products rose, the company set up a new unit that is responsible for paying off the claims and then put that entity into bankruptcy. The unit, LTL Management, will try to negotiate a trust fund that would end all current and future lawsuits related to J&J’s talc products. Earlier this year, the company paid $2.5 billion to about 20 women who blamed J&J’s baby powder for their ovarian cancer. Both the Missouri Supreme Court and the U.S. Supreme Court refused to overturn the verdict.
A bankruptcy judge said that he is unsure whether his North Carolina courtroom is the right venue for a Johnson & Johnson subsidiary to potentially settle tens of thousands of talc-related injury claims and suggested that the case could be moved closer to the consumer goods giant’s New Jersey headquarters, WSJ Pro Bankruptcy reported. Judge J. Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C. also on Wednesday scheduled a November hearing over whether the J&J subsidiary placed into chapter 11 last week should be moved to a bankruptcy court in Delaware or New Jersey, where thousands of talcum-related injury lawsuits have been litigated for years. J&J formed the subsidiary, LTL Management LLC, on Oct. 12, and it filed for bankruptcy on Oct. 14. Filing bankruptcies in states far from corporate headquarters is common practice in large corporate restructurings, but feeds public perception that chapter 11 rules tilt the playing field in favor of large institutions, according to some legal researchers. LTL Management’s chapter 11 filing effectively shifts to North Carolina the fate of nearly 40,000 pending lawsuits alleging talc used in Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. J&J maintains its talc-based products, which it stopped selling in the U.S. and Canada last year, don’t cause ovarian cancer and haven’t contained asbestos. The new J&J subsidiary’s only connections to North Carolina are a bank account and its having been created there, Judge Whitley said. Its chapter 11 filing also raises questions about the corporate reorganization J&J undertook before LTL Management sought bankruptcy protection, the judge said. LTL Management said in a court filing that it has a Bank of America N.A. account in Charlotte. Read more.
In related news, Johnson & Johnson offered $4 billion to settle with victims of its talc-based powder months before putting one of its units into bankruptcy -- twice the amount it’s now proposing to pay through a forced resolution, Bloomberg News reported. The $4 billion offer was aimed at ending more than seven years of litigation over claims its iconic baby powder caused different types of cancers. J&J faces nearly 40,000 suits targeting its talc-based products, and has agreed to about $3.5 billion in settlements so far, according to court filings. The world’s largest maker of health care products reportedly wanted to split the $4 billion between trusts established to settle current and future suits. The trusts would have been created as part of the 2019 bankruptcy case filed by Imerys Talc America Inc., J&J’s talc miner. Lawyers representing a substantial number of talc plaintiffs rejected the $4 billion settlement offer as part of the Imerys case as too low. Plaintiffs would have each received about $40,000 for their cases on average. J&J last made the proposal in March. After it was rebuffed, the company’s attorneys told their counterparts to prepare for a bankruptcy filing by a J&J unit later in the year. Read more.
Johnson & Johnson used the lenient venue-selection rules of U.S. bankruptcy law to push tens of thousands of talc-related cancer claims to its bankruptcy court of choice, roughly 600 miles south of the company’s New Jersey headquarters, the Wall Street Journal reported. The New Brunswick, N.J consumer goods giant follows other companies and nonprofits that have filed chapter 11 cases in venues far from their headquarters to weather lawsuits over harmful products or other alleged wrongdoing. J&J formed a new Texas subsidiary to carry its talc liabilities, then converted that entity to a North Carolina-based company days before it filed for bankruptcy. The chapter 11 filing last week effectively shifts to the U.S. Bankruptcy Court in Charlotte, N.C., the fate of nearly 40,000 pending lawsuits alleging talc used in Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. “Further manipulation of the venue statute by creating entities for the sole purpose of filing in a particular jurisdiction does push this to an extreme that is likely to undermine faith in the bankruptcy system,” said Prof. Stephen Lubben of Seton Hall University School of Law. Congress is considering making forum selection rules more restrictive. The rules have long been flexible in allowing companies their preferred location for filing for bankruptcy protection. Sens. Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) reintroduced legislation last month that would require corporations or wealthy individuals to file chapter 11 either in their home state or where they have significant assets. Congressional Democrats criticized J&J’s decision to put its talc claims into chapter 11, describing it as an abuse of the bankruptcy system. J&J has said bankruptcy provides a forum to fairly compensate claimants, and likely quicker than through the traditional trial system. The company has defeated some lawsuits, lost others and maintained that its baby powder is safe.
