bankruptcy

May 15, 2023

NEW YORK – Cancer victims on Monday urged a US judge to dismiss a Johnson & Johnson subsidiary’s second bankruptcy filing, saying that the company is abusing the bankruptcy system in its renewed attempt to resolve tens of thousands of lawsuits alleging that J&J’s baby powder and other talc products caused cancer.

The J&J subsidiary, LTL Management, filed in April for bankruptcy a second time, seeking to settle all current and future talc claims for a proposed US$8.9 billion (S$11.9 billion). LTL’s first bankruptcy was dismissed after a federal appeals court ruled that the company was not in financial distress and therefore not eligible for bankruptcy.

Plaintiffs have filed more than 38,000 lawsuits that have been consolidated in federal court in New Jersey alleging that J&J talc products sometimes contained asbestos and have caused their ovarian cancer or mesothelioma.

They portray J&J’s actions as an abuse of the bankruptcy system by a multinational conglomerate valued at more than US$400 billion and in little danger of running out of money to pay cancer victims.

J&J and LTL have argued that bankruptcy delivers settlement payouts more fairly, efficiently and equitably than a “lottery” offered by trial courts, where some litigants get large awards and others nothing.

J&J has said its talc is safe, asbestos-free and does not cause cancer.

J&J said its new settlement offer has broad support from cancer victims, a claim disputed by lawyers who objected to the deal. J&J has not estimated the total number of talc claims it faces, and lawyers opposed to the deal said J&J’s settlement support number is inflated by claimants who have never filed lawsuits against the company and whose claims may not be fully vetted.

The healthcare conglomerate has not filed for bankruptcy itself. Instead, it divided its consumer business into two

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May 13, 2023

April 19 (Reuters) – U.S. veterans and members of the military on Wednesday urged a judge to dismiss 3M’s (MMM.N) bid to use the bankruptcy of its subsidiary Aearo Technologies to shield itself from nearly 260,000 lawsuits over military-issue earplugs that former users allege were defective and damaged their hearing.

3M and Aearo say the earplug litigation has spiraled out of control. But attorney Adam Silverstein, who represents veterans suing 3M over hearing loss, said at a court hearing in Indianapolis that filing for bankruptcy, like “pulling a fire alarm,” should be reserved for urgent threats.

Aearo was not in need of emergency rescue, because it had filed for bankruptcy solely as “a strategic alternative to managing 3M’s litigation,” Silverstein said.

“If the firemen determine something is a false alarm, they don’t wait around to see if a fire might start later or if there’s some other problem they can assist with,” he said. “They leave.”

Aearo, which made the combat arms earplugs, filed for bankruptcy last July, with 3M pledging $1 billion to fund its liabilities stemming from the lawsuits that accuse both Aearo and 3M of misrepresenting the earplugs’ effectiveness, leading to hearing damage.

The plaintiffs have called that move a bid to escape the Florida federal court where the earplug lawsuits are consolidated in a so-called multidistrict litigation, following a series of unfavorable legal rulings and trial losses.

On Tuesday, Aearo attorney Chad Husnick said U.S. law does not require the “house to be on fire” before a company files for bankruptcy. Aearo should be allowed to proactively resolve the growing problem of earplug lawsuits through a bankruptcy settlement, Husnick said.

U.S. Bankruptcy Judge Jeffrey Graham will continue to hear evidence on Thursday before he makes a ruling on whether to dismiss the case.

3M’s bankruptcy

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May 12, 2023

A candidate for a Verona Township Council seat has a history of legal and financial difficulties, including multiple arrests on assault charges, that have not yet been raised before the May 9 non-partisan municipal election.

Christian Strumolo has faced a string of arrests and criminal charges over the last two decades, including a 2002 arrest for aggravated assault on a law enforcement officer that was later negotiated down to a guilty plea on a simple assault charge.

Over the years, Strumolo has pled guilty to impersonating a public servant or law enforcement officer, obstructing the administration of a government function, loitering while intoxicated, and assault.

Four years ago, Strumolo was arrested for drunk driving on Bloomfield Avenue in Verona within 1,000 feet of a school. That was his second DUI conviction: the first came in 2008 while driving on Pompton Avenue in Cedar Grove, again within proximity of a school and with a refusal to take a breathalyzer test.

He filed for bankruptcy in 2015 after accumulating over $600,000 in debt and assets of roughly $6,000. Between 2009 and 2018, the Internal Revenue Service and the New Jersey Division of Taxation filed about $500,000 in liens against Strumolo, according to filings with the U.S. Bankruptcy Court. He also owed $8,500 to Caldwell College for unpaid tuition for his minor child.

That happened while claiming monthly take-home pay of $8,250 from a cleaning company he owned.

“Voters can’t make informed decisions unless they’re informed. If you asked any self-respecting constituent of George Santos, they’d tell you they wish they knew then what they know now,” said Micah Rasmussen, the director of the Rebovich Institute of New Jersey Politics at Rider University. “Voter diligence is the most bedrock, necessary principle of casting an informed vote. It will do Verona zero good

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May 5, 2023

MESA, AZ — Legacy Park, a massive sports and entertainment complex in Mesa, opened in January 2022. Now just 16 months later, the owner of Legacy Cares has filed for bankruptcy.

Many parents ABC15 spoke to on Monday said they were unaware of the situation.

“It’s concerning when anybody siphons people like that, and the hope is that they’ll do the right thing. I would hope that they would pay the vendors what they need to because I’m sure there’s going to be reluctance from other vendors to come in after that kind of news,” said a woman whose kids play volleyball at the complex.

Court documents show Legacy Cares filed for bankruptcy on May 1, reporting more than $366.7 million in total liabilities. They told ABC15 they have hired a new management company and an investment banking firm to provide options as it enters Chapter 11.

“This is probably their only way to, you know, to get out of the situation without just completely destroying any future or destroying any, you know, financial credibility that they may have,” said Alison Briggs, an attorney with My Arizona Lawyers.

Legacy Cares also listed in their filing the top 20 creditors with the largest unsecured claims. The first three are:

Fieldturf USA, Inc of Calhoun, GA – $4,974,972.13
Icing Investment Holding, LLC of Phoenix, AZ – $2,436,351.20
Spectra Food Services & Hospitality of Philadelphia, PA $1,378,648.47

“It’s not ideal, certainly, when somebody files a bankruptcy – business or individual – because a lot of people are not going to get paid what they originally contracted for. But it’s also, I mean… this is probably the only way that they would get paid anything,” said Briggs.
Legacy Cares says they do not believe there will be a negative impact on community and

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February 24, 2023

John Ray, who took over as CEO of crypto exchange FTX, has described some of the chaotic experiences at the firm following the company declaring bankruptcy.

In testimony for FTX’s case in the United States Bankruptcy Court for the District of Delaware on Feb. 6, Ray said he and other professionals had “carefully” been conducting an investigation into FTX’s activities, due to the company having no physical office. The FTX CEO seemed to be pushing back against a motion to assign an independent examiner to the bankruptcy case, claiming that “inadvertent errors” could result in “hundreds of millions of dollars of value” being destroyed.

According to Ray, when he took control of FTX in November 2022, there was “not a single list of anything” related to bank accounts, income, insurance or personnel, causing a “massive scramble for information.” The FTX CEO said the same day he helped file a Chapter 11 bankruptcy petition, and there were multiple attempts to steal crypto, resulting in security experts and liquidators moving quickly to secure funds.

“Your normal first-day petition is chaotic as sometimes can be — this was something that I have never experienced,” said Ray. “Those hacks went on virtually all night long […] It was really 48 hours of what I can only describe as pure hell.”

The FTX CEO claimed he had had no connection with former executives at the exchange, including Alameda Research CEO Caroline Ellison, FTX co-founder Gary Wang and former CEO Sam Bankman-Fried or his parents prior to taking control of the company. According to Ray, anyone “that was in a control position” under Bankman-Fried no longer had any authority to direct FTX company actions.

Ray’s testimony came amid a motion from the Office of the U.S. Trustee arguing the court should appoint an independent examiner who

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February 21, 2023

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Johnson & Johnson’s baby powder. Photo: Justin Sullivan/Getty Images

You have to actually be broke to file for bankruptcy protection — at least that’s what a federal appellate court ruled Monday.

Driving the news: The court dismissed the bankruptcy filing by a subsidiary of corporate giant Johnson & Johnson. J&J created the unit — dubbed LTL Management — for the express purpose of holding legal liabilities and then filing for Chapter 11.

Why it matters: The ruling undercuts the emerging corporate strategy of using bankruptcy to excise costly liabilities when the organization itself is perfectly solvent.

“Because LTL was not in financial distress, it cannot show its petition served a valid bankruptcy purpose and was filed in good faith,” a three-judge panel said in its unanimous ruling.

Catch up quick: J&J faces some 38,000 lawsuits from people and their survivors claiming that the company’s talc-based powder caused cancer. J&J has repeatedly denied the allegation.

Critics say that transferring the litigation claims to the new subsidiary and placing that unit in bankruptcy was a tactic to cap J&J’s exposure to the liabilities.

State of play: At the time it put newly formed subsidiary LTL Management into bankruptcy in October 2021, J&J had an equity value of more than $400 billion, a AAA credit rating, and $31 billion in cash and marketable securities.

That means it almost surely had ample liquidity to pay LTL’s obligations — and can’t instead use the bankruptcy process, the court ruled. When LTL filed for bankruptcy, J&J was worth at least 25 times more than its estimated total product liabilities over

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February 15, 2023

By Dietrich Knauth

(Reuters) -FTX’s lawyers on Monday strongly urged a U.S. bankruptcy judge in Delaware not to greenlight a court-supervised investigation into its collapse, saying it would waste time and money and could pose a security risk.

FTX attorney James Bromley at Monday’s hearing told U.S. Bankruptcy Judge John Dorsey, who is overseeing the crypto exchange’s Chapter 11 case, that the proposed review the U.S. Department of Justice’s bankruptcy watchdog is seeking is so vague that it is essentially asking for an examiner to look at “everything, everywhere, all at once.”

The U.S. Trustee has asked Dorsey, to appoint an independent examiner to investigate allegations of fraud, misconduct, and mismanagement that are “too important to be left to an internal investigation.”

Juliet Sarkessian, an attorney for the U.S. Trustee, argued such an investigation is mandatory under federal law in large bankruptcy cases where DOJ or a creditor requests one.

Dorsey, who said he believed an examiner was not required, but should be appointed if “appropriate,” did not rule on Monday. He asked FTX, its creditors and the U.S. Trustee to try to reach an agreement on the scope of a potential examiner review.

FTX said an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies, adding cost and delay to its effort to repay customers in bankruptcy.

FTX’s new CEO, John Ray, said on Monday that FTX has already answered 156 requests for information from federal prosecutors in Manhattan, producing 70,000 documents, as well as hundreds of requests from other U.S. regulators and prosecutors, members of Congress and foreign governments.

Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, told the court that examiners in those cases cost $90 million and $100 million, respectively, but

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February 13, 2023

Diamond Sports, which operates the Bally Sports Regional Networks and its 19 channels, could soon file for bankruptcy protection. But if they do, that doesn’t necessarily mean an end to the RSN deals in place.

It’s become almost a parlor game predicting when the bankruptcy comes — “if” does not seem a necessary conjunction any longer — as the struggling RSN-empire staggers under steep losses generated by cord-cutting and debt from Sinclair’s mistimed 2019 acquisition of the sports media channels. A subsidiary of Sinclair, Diamond in November disclosed a $1.2 billion quarterly loss amid a 10 percent drop in subscribers.

Bloomberg diamond-faces-8-6-billion-debt-reckoning?sref=W6GJF3MS#xj4y7vzkg”last month reported, “Diamond will probably skip a mid-February $140 million interest-only payment servicing around $8.6 billion in debt as it prepares for a Chapter 11 restructuring.”

All this has led to predictions of gloom and doom for the 42 teams (14 MLB, 12 NHL, and 16 NBA) aired on the RSNs, with fears Diamond may walk away from those contracts amid bankruptcy. This has reverberated throughout the leagues and teams and led MLB reportedly into thus far unsuccessful talks to negotiate some type of a buyout of the RSNs.

Kawhi Leonard is interviewed by reporter Kristina Pink as part of Bally Sports’ Clippers coverage. (Kirby Lee / USA Today)

But how in danger are the RSN deals in bankruptcy? They are certainly substantial risks to what is a very large income stream for the teams. In the first nine months of last year, Diamond made sports rights fee payments of $1.47 billion, according to the company’s most recent quarterly report. Including the last quarter of 2022, Diamond has on its books future obligations to pay rights fees of $12.7 billion, according to the quarterly filing.

But while at first glance it might seem like

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February 11, 2023

Former FTX chief executive Sam Bankman-Fried leaves Manhattan federal court, on Jan. 3.DAVID DEE DELGADO/Reuters

A U.S. bankruptcy judge is considering at a Monday court hearing in Delaware whether to greenlight a court-supervised investigation into the collapse of FTX, a course of action that the crypto exchange opposes as redundant and wasteful.

The U.S. Department of Justice’s bankruptcy watchdog has urged U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX’s Chapter 11, to appoint an independent examiner to investigate allegations of “fraud, dishonesty, incompetence, misconduct, and mismanagement” that are “too important to be left to an internal investigation.”

Juliet Sarkessian, an attorney for the U.S. Trustee, said such an investigation is mandatory under federal law in all large bankruptcy cases where DOJ requests one.

FTX has said an examiner would merely duplicate work already being done by FTX, its creditors, and law enforcement agencies.

FTX attorney James Bromley told Dorsey that an investigation is not appropriate, and allowing new investigators to access its systems could jeopardize the cybersecurity of FTX’s ongoing investigation.

FTX’s new CEO, John Ray, said that FTX has already answered 156 requests for information from federal prosecutors in Manhattan, producing 70,000 documents, as well as 151 requests from the U.S. Commodity Futures Trading Commission and hundreds of requests from other U.S. regulators and prosecutors, members of Congress and foreign governments.

FTX has acknowledged that its past conduct raised questions about fraud and mismanagement, but has said another layer of review would only add cost and delay to the company’s effort to repay customers in bankruptcy.

Ray, who worked with court-appointed examiners while leading Enron Corp and Residential Capital through bankruptcy, told the court that examiners in those two cases cost $90 million and $100 million, respectively, but were not useful.

“They were very shallow –

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February 10, 2023

According to a new report, the controversial law firm Sullivan & Cromwell is on track to reap a fortune from its work on the FTX cryptocurrency exchange’s bankruptcy case.

Sullivan & Cromwell’s costs in the FTX case are estimated to reach hundreds of millions of dollars before the firm’s bankruptcy investigation is over, Bloomberg Law reported on Jan. 27.

As the FTX trial is scheduled for October 2023, the firm’s lawyers now have about eight months to untangle the complicated FTX case, which will cost a lot of time and money. Sullivan & Cromwell has more than 150 people working on the FTX case, including 30 partners with rates exceeding 2,000 per hour. The report notes that associates are charging up to about $1,500 per hour, citing a court filing.

In a court declaration, Sullivan & Cromwell said that its proposed fees are in accordance with market rates by other leading law firms and actually represent a discount from the rates used in non-bankruptcy matters.

Bankruptcy experts have been facing a high demand as the crypto winter of 2022 generated many bankruptcy filings, including those by major crypto firms like Genesis Global Trading, Celsius Network and Voyager Digital.

According to Jonathan Lipson, a Temple University law professor, lawyers are going to do very well in cases like FTX, “just as the professionals have done very well in other big cases.” For example, New York-based law firm Weil Gotshal made about $500 million in fees from the bankruptcy of Lehman Brothers in 2008.

Lipson said that such big expenses can be justified as Sullivan & Cromwell can potentially help investigators recover money from FTX, stating:

“The important question is never are the lawyers charging a lot. It’s, is it worth it? If they can recover a lot of

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bankruptcy

Cancer victims urge US judge to dismiss J&J talc unit’s second bankruptcy

US veterans suing 3M over earplugs seek to stop unit’s ‘false alarm’ bankruptcy

Verona council candidate has history of arrests, bankruptcy

Owner of Legacy Park files for bankruptcy

FTX CEO testifies on ‘pure hell’ post-bankruptcy days at exchange

Must be broke, court says

FTX points to cost, cyber-risk in opposing independent bankruptcy investigation

What could a Bally Sports bankruptcy mean for RSNs’ team deals?

U.S. bankruptcy judge weighs demand for independent investigation into collapse of FTX

FTX lawyers to reap millions from the bankruptcy case: Report

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