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Lawmakers heard arguments on Wednesday in favor of amending laws to limit protections for non-bankrupt individuals through a company’s bankruptcy, a move prompted by concerns that members of the wealthy Sackler family who own Purdue Pharma LP may avoid accountability for their role in promoting opioid sales, Reuters reported. The hearing yesterday before the U.S. House of Representatives’ Judiciary’s Subcommittee on Antitrust, Commercial and Administrative Law came as Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Richard Blumenthal (D.-Conn.), as well as Reps. Jerry Nadler (D-N.Y.) and Carolyn Maloney (D-N.Y.), announced legislation in the House and Senate aimed at reforming certain areas of bankruptcy law. The Nondebtor Release Prohibition Act of 2021 would prohibit litigation shields for owners or insiders of bankrupt companies. Though not included in the legislation, Wednesday’s hearing also focused on potential reforms to limit the ability of bankrupt companies to select judges they think will be favorable to them. The issue of so-called third-party or non-debtor releases, has been a hot topic in Purdue’s chapter 11 case. Connecticut Attorney General William Tong testified yesterday’s hearing that legislation is needed to prevent cases like Purdue’s, where Sackler family members are set to receive releases of lawsuits over their role in the national opioid epidemic in exchange for $4.5 billion. The money is being put toward trusts that will distribute the funds to states for opioid abatement programs and to people and entities that brought opioid-related lawsuits. Tong is one of a handful of remaining state attorneys general opposing the Purdue deal. Lawmakers also heard from bankruptcy experts about the ability of lawyers for large companies to select the judge they feel will provide the best results for them. Prof. Adam Levitin of Georgetown University Law School testified that bankruptcies should be randomly assigned to judges within a district without regard to which division they sit in. Read more.
https://www.reuters.com/article/us-bankruptcy-reform-bill-idUSKBN2EY2XO

Click here to view the witness list, prepared testimony and an archive file to watch a replay of the hearing.
https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=4666

Rep. Zoe Lofgren (D-Calif.) and Rep. Ken Buck (R-Colo.) yesterday introduced H.R. 4193, the "Bankruptcy Venue Reform Act of 2021," to require that chapter 11 bankruptcy proceedings take place where the principal place of business or principal assets of the corporation are located, according to a press release. The bill's aim is to ensure that the employees, small businesses, and local communities that are most impacted by a chapter 11 bankruptcy are able to fully and fairly participate in proceedings, according to Lofgren and Buck. “Justice is best served when corporate bankruptcies are adjudicated locally, with convenient court access for employees, retirees, and local creditors and a judge who knows the affected community,” said Rep. Lofgren. "Our bill will require corporations filing chapter 11 bankruptcy to go through those proceedings in the forum they are primarily located rather than running off to a court across the country," said Rep. Buck. "This will eliminate companies’ ability to tilt the scale of justice and ensure the case is heard in a court familiar with all the affected stakeholders.” The Bankruptcy Venue Reform Act of 2021 bill text is linked here.