The recent U.S. Supreme Court ruling that scuttled OxyContin maker Purdue Pharma’s financial ruin agreement may want to have a sweeping effect on how U.S. bankruptcy courts handle cases aimed at resolving sprawling litigation. This article explores ongoing bankruptcy cases that could be significantly affected by this ruling.
Catholic Dioceses and Bankruptcy Cases
More than two dozen Catholic dioceses have filed for bankruptcy in recent years due to an avalanche of lawsuits by childhood victims of clergy sexual abuse, following changes in state laws that allowed new lawsuits to be filed for older sex abuse claims. The archdioceses of San Francisco, Baltimore, and New Orleans, at the side of numerous big dioceses in New York country and California, are some of the Catholic companies presently in bankruptcy.
In the Purdue case, the Supreme Court ruled that U.S. financial ruin regulation does now no longer permit courts to wipe away prison claims in opposition to events which have now no longer filed for financial ruin themselves without the consent of those suing them. This decision directly impacts the use of “non-debtor releases,” which have become more widespread beyond their original context of asbestos litigation. Non-debtor releases allow outside parties to contribute funding for a bankruptcy settlement in exchange for legal protection from current and future lawsuits.
Without non-debtor releases, Catholic organizations would face a “destructive” choice, according to the U.S. Conference of Catholic Bishops. They would either have to pay less to survivors and allow “piecemeal litigation” to continue against other defendants or undergo the “enormous waste and expense” of filing separate and Duplicative financial disaster court cases for every Catholic entity that might be named in a lawsuit. The Diocese of Rockville Centre on New York’s Long Island, already struggling before the Purdue decision, exemplifies how critical and controversial non-debtor releases can be.
Boy Scouts of America
The Boy Scouts of America’s $2.46 billion economic catastrophe settlement of 82,000 sexual abuse claims is also beneathneath threat no matter the corporation exiting economic catastrophe extra than a 12 months ago. A small group of 144 abuse claimants and some insurance companies continue to appeal the settlement, and the Purdue ruling could bolster their opposition.
The Boy Scouts, similar to the Catholic dioceses, used non-debtor releases to gather settlement contributions from other organizations, including insurers, local Boy Scouts councils, and non-affiliated charities and churches that ran Scouting programs. These groups supplied maximum of the coins for the settlement, whilst the incredibly coins-terrible countrywide Boy Scouts business enterprise contributed less-liquid belongings like a group of Norman Rockwell artwork valued at $59 million.
The Boy Scouts of America filed a brief in the Purdue case, urging the Supreme Court to ensure its ruling did not retroactively apply to older bankruptcy cases, arguing it would be “deeply inequitable and practically impossible” to restart settlement talks so late after the bankruptcy deal was approved.
Other Mass Tort Cases
The Purdue ruling will broadly affect mass tort cases, making it more difficult for debtors to gather settlement contributions from outside parties, such as insurers and corporate owners, who also Face legal responsibility for the court cases that drove an employer into bankruptcy. There have been fewer new mass tort bankruptcies this year due to uncertainty over the Supreme Court’s Purdue ruling and the high-profile dismissals of contentious bankruptcy cases initiated by wealthy corporations like Johnson & Johnson (NYSE:JNJ) and 3M (NYSE:MMM). However, some older mass tort cases are still progressing through the courts.
Other active bankruptcies involving large numbers of lawsuits include pharmacy chain Rite Aid (OTCMKTS:RADCQ), prison health contractor Tehum Care, and fire safety company Kidde-Fenwal.
Conclusion
The Supreme Court’s ruling on Purdue Pharma’s bankruptcy settlement will have far-reaching consequences for current and future bankruptcy cases. It highlights the complexity and contentious nature of using non-debtor releases to resolve mass tort litigation. As these cases unfold, the legal landscape for bankruptcy settlements involving multiple parties will continue to evolve, affecting numerous organizations and their ability to resolve litigation efficiently.
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