In a recent article, Mayer Brown’s Matthew Wargin, Aaron Gavant, Jade Edwards, and Lauren Wray examine a new iteration of coercive sanctions imposed on potentially “double dipping” foreign creditors in Latin American airline Avianca’s chapter 11 case in the Southern District of New York. Avianca sought to sanction over 150 foreign creditors, asserting that
Automatic Stay/Discharge Order
Opinion Alert: Third Circuit Dismisses LTL Mass Tort Bankruptcy, Holding “Good Faith” Requires “Immediate” Financial Distress
In a decision likely to have significant impact on certain types of bankruptcy filings going forward, this morning, the Third Circuit Court of Appeals ordered the dismissal of the Chapter 11 bankruptcy case filed by Johnson & Johnson affiliate LTL Management LLC.
After completing a multi-step divisional merger under Texas law (which led to LTL…
What We’re Reading This Week [August 8, 2022]
Reuters reports that Coinbase’s shares rose more than 16% last week after the cryptocurrency exchange announced its partnership with BlackRock, the world’s largest asset manager. Under the agreement, Coinbase’s institutional trading platform Prime, which services hedge funds, corporate treasuries and other financial institutions, will provide crypto trading and custody services to Coinbase’s institutional clients using…
Opinion of Interest – In re Wolfson: A Potential Re-Evaluation of the “Undue Hardship” Test for Student Loan Borrowers
In its January 14, 2022 decision in In re Wolfson, the United States Bankruptcy Court for the District of Delaware discharged Chapter 7 debtor Ryan K. Wolfson of nearly $100,000 in student loan debt. Chief Judge Laurie Selber Silverstein found that Wolfson, an often un- or underemployed and chronically ill man, met the three-prong “Brunner test” and proved that repayment of his student loans would result in “undue hardship” under Section 523(a)(8) of the Bankruptcy Code. Declaring most interpretations of Brunner “unmoored from the original test and the plain language of ‘undue burden,’” Judge Silverstein held that, under the Brunner test, a debtor need only show an inability to maintain “a minimal standard of living” while repaying his or her student loans, not a total incapacity to ever repay them. In discharging the nearly six-figure debt, Judge Silverstein’s opinion found that allowing lifelong student loan debts to escape discharge absent an onerous standard of undue hardship conflicted with the promise of a “fresh start” that the Bankruptcy Code offers.
Continue Reading Opinion of Interest – In re Wolfson: A Potential Re-Evaluation of the “Undue Hardship” Test for Student Loan Borrowers
What We’re Reading This Week [January 24, 2022]
Reuters reports that a district court judge has deferred to the bankruptcy court on whether Johnson & Johnson is entitled to the continuing protection of the Bankruptcy Code’s automatic stay from mass tort lawsuits that it would otherwise face relating to its talc products while its subsidiary, LTL Management, proceeds through bankruptcy. A committee of…
J&J Talc Bankruptcy Case: Events Leading Up To Potential Dismissal Battle
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).…
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Opinion of Interest – When the Automatic Stay is No Shield – Pennsylvania Court Holds that Government’s Unfair Labor Claims Are Subject to Police Power Exception
Breaking with a Sixth Circuit decision to the contrary, in a March 2021 decision in Stewart v. Holland, the District Court for the Western District of Pennsylvania held that unfair labor claims brought by the Department of Labor against a debtor under the Fair Labor Standards Act (“FLSA”) were not barred by the automatic stay but could instead proceed under the “police powers exception.”1
Continue Reading Opinion of Interest – When the Automatic Stay is No Shield – Pennsylvania Court Holds that Government’s Unfair Labor Claims Are Subject to Police Power Exception
Opinion of Interest – In re United Refining Company: Destruction of Records and the Accrual of Tort Claims
In a January 2021 decision issued in the re-opened United Refining Company1 bankruptcy case, Judge Lopez of the Southern District of Texas Bankruptcy Court addressed when a tort claim is deemed to arise for purposes of determining whether it was discharged. In particular, the court had to determine whether an asbestos-related claim arose at the time of exposure (in other words, the time at which the damaging act occurred) or at the time when the harm is diagnosed (in other words, when the claim was discovered). Complicating things for the court was a lack of records from the 1980s bankruptcy case at issue, which also led to uncertainty as to whether the claimant had notice of the bankruptcy. That in turn could have led to the conclusion that his claim had not been discharged regardless of the court’s determination of when the claim accrued. As discussed below, the Court concluded that the claim was a prepetition claim discharged under the plan, and that all creditors were bound by such plan absent a showing that there was no proper notice.
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The NRA Bankruptcy: What You Need to Know About the National Rifle Association’s Recent Chapter 11 Filing
The National Rifle Association (“NRA”), along with its wholly owned Texas subsidiary, filed for chapter 11 bankruptcy protection on January 15, 2021 in the Bankruptcy Court for the Northern District of Texas. The case already has presented several threshold issues and challenges that are of interest to both bankruptcy practitioners and the market as a whole.
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Supreme Court Holds That Retaining Impounded Vehicles Does Not Violate Automatic Stay
In a post for Appellate.net, Restructuring partner Aaron Gavant and associate Samuel Rabuck and Supreme Court & Appellate partner Nicole A. Saharsky summarize the Supreme Court’s recent decision in Chicago v. Fulton.