Below is our initial take on recent bankruptcy-related developments:
A federal bankruptcy judge in Indianapolis ruled that thousands of military veterans who claim hearing loss from 3M earplugs can continue to litigate their claims against 3M, despite the July 26 bankruptcy of several 3M subsidiaries.
S&K Take: The Indianapolis bankruptcy court rendered a huge decision last Friday after the weekly roundup was posted, denying an injunction for the benefit of 3M, the parent of bankrupt Aearo. An appeal of that decision is already in the works, but it is significant regardless. It is the first of the mass tort cases where a stay of litigation against the parent of the bankrupt entity was denied. This decision was foreshadowed a bit by the reaction to this issue in prior cases, like Purdue and J&J, and it remains to be seen whether this becomes a trend. Regardless, a big decision that will certainly have everyone’s attention.
Free Speech Systems, the bankrupt parent company of Infowars, has agreed to face a second defamation trial from Sandy Hook parents, even though the company’s bankruptcy would normally protect it from lawsuits.
S&K Take: In more automatic stay related news, Free Speech Systems, a debtor, has agreed to allow non-bankruptcy litigation to continue to establish damages on defamation claims. The amount of these claims would have to be determined in some forum, but typically debtors prefer bankruptcy court. An interesting maneuver by the debtor here, although nothing that FSS has done has been “by the book.”
NewAge Inc, a direct-to-consumer health and wellness product seller, filed for Chapter 11 bankruptcy this week with intentions to sell its company, after the company received a default notice on a loan agreement earlier in August.
S&K Take: A few new filings hit the docket this week, continuing the uptick in bankruptcy activity. NewAge was one, along with Packable and Lumileds which is mentioned below. Looks like restructuring professionals should be in for a busy Q4.
Apollo Global Management will lose their control over LED lighting firm Lumileds, since the company has entered its U.S. and Dutch operations into Chapter 11 proceedings with the goal of reducing its debt by $1.3 billion.
S&K Take: As noted, another big filing, this one of the prepack variety. Hopefully the trend continues as everyone comes back to the office after the holiday weekend!