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The Bankruptcy Court for the Southern District of New York (the “SDNY”) has been a longstanding epicenter of Chapter 11 filings. Historically seen as one of the more pro-debtor forums in the country, large companies often filed in the SDNY to take advantage of that stance. Some debtors appear to have attempted to direct their cases to specific judges within the district who were seen as particularly pro-debtor. One recent example was the bankruptcy filing by OxyContin producer, Purdue Pharma. Facing a historic indictment by the Department of Justice, along with mounting tort claims relating to the marketing of its drugs, Purdue—a company headquartered in Connecticut—changed the mailing address of one of its units from Albany to White Plains six months before filing for bankruptcy.[1] As a result, Purdue was able to file its petition in the bankruptcy court in Westchester (within the Southern District) so that it could be heard by Judge Robert Drain, a longtime judge with extensive experience over cases for large-chapter 11 debtors and the only commercial bankruptcy judge in Westchester.[2] Purdue rationalized its decision by stating that “White Plains is about 15 miles from our corporate headquarters and is the closest federal Bankruptcy courthouse,” yet many took issue with this supposed rationale.[3] Purdue was also not an isolated case. Nationwide, a subset of three judges (including Judge Drain)—out of the total three hundred and seventy-five bankruptcy court judges—heard 57% of all large public company Chapter 11 filings in 2020.[4]

Continue Reading Attempting to Close the Shops: New York and Virginia Adopt Random Case Assignment to Discourage Forum Shopping

Recapping 2021, Bloomberg reported that last year saw the fewest annual bankruptcy filings in nearly four decades, falling 24% from 2020. A total of 3,596 chapter 11 cases were filed in 2021, about 3,000 fewer than the year before. The stimulus funds and easy access to liquidity combined with debt forbearance were pointed as the

On Tuesday, December 21, Bloomberg Economics reported that the latest strain of COVID-19, Omicron, is set to halve fourth quarter global economic growth. According to Bloomberg, the global economy is expanding at just 0.7% in the final three months, which is half the pace of the third quarter. The European economy is on pace for

Fox Business reports that Boy Scouts of America’s insurer Chubb Ltd. has pledged to contribute $800 million to the Boy Scouts of America’s bankruptcy settlement deal. Boy Scouts of America, which filed for bankruptcy in February 2020, is currently on track to settle with approximately 82,500 tort claimants who claim they were sexually abused as children by troop leaders. The latest contribution by Chubb raises the total amount of available funds to resolve the claims to more than $2.7 billion. The fund is also backed by Boy Scouts of America’s primary insurer, the Hartford Financial Group, as well as the Church of Jesus Christ of Latter-day Saints. Ultimately, Boy Scouts of America’s emergence from Chapter 11 hinges on a settlement with tort claimants, and, while several victims have voiced support for the settlement deal, a separate committee of claimants voiced concerns that the deal compromises too much in exchange for a quick exit. The abuse claimants have until December 28th to vote on the reorganization. [Fox Business; Dec. 13, 2021]

Continue Reading What We’re Reading This Week [December 16, 2021]

The Economist discusses how the Omicron variant has exacerbated potential threats to the world economy, including that tightening of domestic and global travel restrictions in response to Omicron will harm growth, that the variant will cause further supply chain bottlenecks that may result in inflation heading even higher, and that the variant may cause a

Background

Johnson & Johnson’s newly-created subsidiary, LTL Management LLC (“LTL”), filed for bankruptcy in the Western District of North Carolina on October 14, 2021, with the primary goal of resolving thousands of tort claims (and nearly 40,000 pending lawsuits) related to the company’s talcum powder-based products – LTL’s only liabilities.  LTL was formed two days before the filing under a Texas law which allowed Johnson & Johnson subsidiary Johnson & Johnson Consumer Inc. to split into two new entities:  one (LTL) assigned its billions in talc liability and one (“New JJCI”) assigned with its remaining assets.  As part of the transaction, LTL also received certain assets, including approximately $6 million in cash and certain royalty streams, which the debtor projects will generate approximately $50 million in revenue per year over the next five years.  Additionally, Johnson & Johnson and New JJCI committed to:  (a) fund a trust with an aggregate amount of $2 billion to pay for current and future tac-related claims asserted against LTL; and (b) pay all costs and expenses of LTL in the normal course of business (up to the full value of New JJCI).


Continue Reading J&J Talc Bankruptcy Case: Events Leading Up To Potential Dismissal Battle

Los Angeles Business Journal reports on the anticipated increase in bankruptcy filings by hotels in light of the uneven economic recovery and reduction of government support, as lender patience is expected to wear thin.

The Wall Street Journal writes that businesses are taking a wait-and-see approach to the new Omicron variant of Covid-19 that emerged

The Wall Street Journal reports that the US Senate passed a bill to require lawyers, accountants, consultants and other professionals hired by Puerto Rico in its bankruptcy proceedings to make additional disclosures of their various connections, in order to shed light on potential conflicts of interest. In February 2021, a companion version of this bill

Reporting from the Wall Street Journal indicates that plaintiffs in price fixing lawsuits against generic drugmaker Teligent Inc. have sought court authority to continue that litigation despite Teligent’s October bankruptcy filing.  The litigation, which commenced in 2016, alleges that Teligent artificially inflated the costs of certain generic drugs and is being pursued primarily by attorneys

Whether—and in what circumstances—a debtor should pay creditors a make-whole premium continues to be litigated in bankruptcy courts. Last week, as reported by Bloomberg, Judge Dorsey (Delaware) ruled that the debtor – Mallinckrodt Plc – did not need to pay a make whole premium to first lien lenders in order to reinstate such obligations