What we read this week [May 3, 2022] – Insolvency/Bankruptcy
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the the wall street journal reports Thursday’s surprise announcement from the U.S. Department of Commerce that U.S. gross domestic product unexpectedly shrank at an annualized rate of 1.4% during the first quarter of 2022. The WSJ does not expect this that the GDP report changes the Federal Reserve’s plan to raise interest rates this year, including at its next meeting this week. Meanwhile, some fear that this is the beginning of a period of stagflation, that is, stagnant economic growth combined with high inflation which together significantly weaken purchasing power. [WSJ; April 28, 2022]
Reuters provides an update on the Sackler family’s latest efforts to finalize settlements and secure the release of opioid-related claims in the Purdue Pharma bankruptcy. The Sacklers had originally promised to contribute $5 billion to Purdue Pharma to pay claims under Purdue’s confirmed Chapter 11 plan, but the district court, on appeal of the court’s order confirming the plan, bankruptcy, rejected the plan, believing that the non-consensual releases in favor of the Sackler family were illegal. Purdue appealed to the Court of Appeals for the Second Circuit, which held oral argument last Friday. During the row, representatives for the Sackler family noted that their contribution had been increased to $6 billion while arguing that settlements of this nature, including non-consensual releases of claims under a plan of Chapter 11, are not prohibited by the United States bankruptcy code. A Second Circuit ruling could have wide-ranging implications, not just for Purdue’s bankruptcy case, but also for the legality of non-consensus versions of the plan more broadly. [Reuters;
April 29, 2022]
Law360 discusses recent developments in the Chapter 11 bankruptcy cases of three non-operating subsidiaries of Alex Jones’ InfoWars business. Bankruptcy Judge Lopez for the Southern District of Texas scheduled motions from the U.S. trustee and tort plaintiffs to dismiss the three bankruptcy cases for May 27 and said those motions would be heard before the InfoWars Debtors petition. to appoint trustees for the litigation trusts. The U.S. trustee argues that the cases should be dismissed for cause as bad faith filings because the cases “serve no valid bankruptcy purpose and were filed to gain tactical advantage in the Sandy Hook lawsuits.” Meanwhile, under the debtors’ proposal, Alex Jones and another related entity would fund up to $10 million into litigation trusts, over time, for the settlement of defamation claims brought against Jones and InfoWars. [Law360; April 29, 2022]
SCOTUSBlog notes that the United States Supreme Court has just agreed to hear a case which raises the question of whether Section 523(a)(2)(A) of the Bankruptcy Code can be used to exclude debts from discharge of an individual debtor on the basis of fraud.” This provision of the Bankruptcy Code allows creditors to seek to exclude debts incurred by “false pretense, false representation or actual fraud” from the bankruptcy discharge of ‘an individual debtor, rendering those debts permanently undischargeable. By granting certiorari in this case, the Supreme Court is able to resolve a divided circuit as to whether the fraud can be traced to an individual who was absolutely not at the aware of wrongdoing, thereby making the innocent individual permanently liable for the fraud of another individual despite obtaining release from other debts. [SCOTUSBlog;
May 2, 2022]
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