Below is our initial take on recent bankruptcy-related developments:
Mediators in the Purdue Pharma bankruptcy case reported that the revised settlement no longer includes nonconsensual third-party releases.
S&K Take: The Purdue Co-Mediators disclosed additional facts around the proposed agreement that might finally buy peace in the Purdue-Sackler saga. The structure is creative, with a death-trap of a kind. The Sackler claims are separated into two buckets—estate claims and direct claims—each with a corresponding settlement amount. All claimants will receive their share of the estate claims settlement amount. Whether they receive any amounts on account of their direct claims, however, depends on whether they grant the Sacklers a release. If the claimant declines, that amount goes back to the Sacklers to pay litigation costs. Tidy, right? It will be fascinating to see how many individual claimants actually try to tackle the behemoth. Of note, there is also an allocation between the Mortimer and Raymond (we couldn’t just name him Randolph?) Sackler sides, where Mortimer shoulders 57.5% of the burden. Look forward to perusing the plan, slated to come out in March.
Just one month after filing for Chapter 11 bankruptcy protection, fabric and crafts retailer Joann Inc. announce it plans to shut down all of its 800 U.S. stores.
S&K Take: A sad day for craft aficionados, as JoAnn has confirmed that it is going into a full chain liquidation process. The Debtors are selling their assets to Great American and the prepetition lenders, who will conduct the liquidation. The Debtors also filed a plan of liquidation to put a “stake in the ground” for the wind-down of the company. The plan incorporates a GUC settlement which sees some funds ($1 million) going from the lenders to GUCs, with some other goodies included as well. Those assets will be pushed to a trust. Litigation claims against the lenders will be purchased as part of the sale. Guess folks will have to go to Michael’s (at least until their filing).
Judge Littlefield is deciding whether to permit several child sexual abuse lawsuits against the Roman Catholic Diocese of Albany to go to trial as a method to kick start settlement discussions.
S&K Take: Interesting thought here by Judge Littlefield. Litigation stays in mass tort cases have become the norm, with the “temporary stay” in Purdue going on 5 years at this point. One of the fundamental tenets of bankruptcy is that the Debtors get a “breathing spell” (although there is an open question of whether that should extend to non-debtors) to sort out their issues. When a case languishes, however, as the Diocese cases tend to do (with most in the 3-5 year range for resolution), it makes sense to reconsider. Stays should not be indefinite, and the “parade of horribles” touted by many a debtor counsel might not be so bad. Judge McMahon noted that in her last Purdue decision on this issue stating that it is possible to concurrently litigate and mediate. The question is when do the floodgates open? That is the balance that needs to be struck. Judge Littlefield noted that allowing litigation to proceed broke the logjam in the Buffalo case. Might be time in Albany as well.