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Sen. Richard Blumenthal (D-Conn.) and Connecticut Attorney General William Tong said Monday that they are backing federal legislation that would block the Sackler family from using bankruptcy law to protect a fortune earned from Purdue Pharma’s manufacture of deadly opioids, the Hartford Courant reported. Blumenthal and Tong said that a bill before Congress would close a loophole in the U.S. Bankruptcy Code which they say the Sackler family has used to evade liability in government lawsuits. Connecticut and other states are still pursuing litigation against Purdue Pharma, which is owned by the Sackler family. The bill, dubbed the SACKLER (“Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases”) Act, would amend bankruptcy law to prevent non-bankrupt individuals from receiving legal protections through a company’s bankruptcy. Speaking at the State Capitol Monday, Blumenthal argued that the Sackler family, which owns Purdue Pharma, has used the company’s bankruptcy proceedings to gain release from liability. Purdue Pharma filed for chapter 11 protection in 2019 in an attempt to settle about 3,000 lawsuits it faced from state and local governments and other entities. The plaintiffs had claimed that the company’s marketing of its painkiller drove a crisis that has resulted in nearly 500,000 deaths across America in the last two decades.

Official advisers to Washington Prime Group Inc. stockholders, skeptical of the company’s proposed sale to SVPGlobal, are trying to slow down the mall landlord’s bankruptcy, Bloomberg News reported. A government-appointed group of Washington Prime stockholders has asked Judge Marvin Isgur to extend key deadlines in the insolvency proceedings by more than a month, arguing in court papers that the group’s advisers don’t have enough time to evaluate the real estate investment trust’s chapter 11 exit plan. Washington Prime may be worth more than the plan implies, but more time is needed to figure that out, the group says. Washington Prime entered bankruptcy last month after the pandemic forced shoppers to stay home, crushing its tenants and sapping revenues. But rising vaccination rates and a resurgent U.S. economy have begun to reverse the company’s fortunes, making it difficult to pin a value on its portfolio of roughly 100 shopping centers across the U.S. The company plans to exit bankruptcy by handing ownership to investment firm SVPGlobal in exchange for debt forgiveness, assuming no better offers come in. But the plan’s August approval deadline leaves relatively little time for competing bidders to make moves, and the company has said new offers must be all cash and exceed $2.3 billion. Read more.

Occupancy issues are at the heart of many significant retail cases, as detailed in the ABI publication Retail and Office Bankruptcy: Landlord/Tenant Rights, available at the ABI Store. 

Sen. Elizabeth Warren is bolstering efforts by Democratic lawmakers to stop the owners of OxyContin maker Purdue Pharma LP from using the company’s bankruptcy to shield themselves from lawsuits blaming them for the opioid crisis, WSJ Pro Bankruptcy reported. The Massachusetts Democrat is sponsoring a Senate bill set to be introduced next week that calls for prohibiting owners of bankrupt businesses or other individuals who haven’t filed personal bankruptcy from getting so-called nonconsensual third-party releases protecting them from litigation by government entities and private citizens. A companion bill in the House is also slated to be introduced next week. The type of legal protection the Sacklers seek has traditionally been available only to those filing for bankruptcy, Warren said. “If the Sacklers want to stop those lawsuits, they can file for bankruptcy just like normal people do when they’re overwhelmed by debts,” Warren said. “There is not one set of laws for everybody in this country and a special exception for rich people. The Sacklers are trying to get something special for themselves and I want to cut them off at the pass.” The Sacklers are offering to pay about $4.5 billion in exchange for protection from private lawsuits, as well as enforcement actions from states that oppose Purdue’s chapter 11 plan. The bankruptcy plan has the support of most creditor groups and more than 30 states but is opposed by a handful of other states, the District of Columbia and the Justice Department’s bankruptcy watchdog. Members of the Sackler family have denied wrongdoing and have said their settlement is an important step to help those suffering from opioid addiction. Lawyers for the Sacklers have said in court papers that family members who served on Purdue’s board acted “lawfully and ethically” and have been unfairly accused of contributing to the opioid crisis.

Companies on the brink of insolvency are increasingly appointing independent directors to their boards as they prepare for a bankruptcy filing, but their neutrality is disputed by creditors, lawyers and academics, WSJ Pro Bankruptcy reported. The companies label these directors as disinterested experts who act to maximize value for creditors by investigating the reasons for the bankruptcy, dealings between the company and its owner, and other matters. The directors’ input carries significant weight with bankruptcy judges, who tend to defer to their findings that a particular settlement or transaction is fair, years of court rulings show. The problem, according to new research, is that some of these directors are biased in favor of the companies that hired them. The directors have financial incentives to build reputations as friendly to the companies and lawyers that help them land similar gigs in the future, researchers at the University of California Hastings College of the Law and Tel Aviv University said in a study published last month. While such directors are independent from the company, they are also “grateful to the lawyers who brought them into the case,” said Al Togut, a bankruptcy lawyer with Togut, Segal & Segal LLP. Some creditors pay the price for this “structural bias,” according to the study, which examined 770 large chapter 11 filings between 2004 and 2019. It found that independent directors sometimes stifled investigations, rejected potential legal claims and rushed negotiations, resulting in less money recovered for low-ranking creditors with the most to lose. Read more. 

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