Category: Business Law News

In late December 2023, U.S. bankruptcy court in North Carolina denied motions to dismiss the Texas Two-Step mass-tort bankruptcy cases of entities created to resolve the asbestos liability of the Trane companies. This type of maneuver involves splitting a company into two, moving the liabilities to one company, and then seek bankruptcy protections to absolve that company of liability. In the opinion (pages 32-39) denying the Trane companies the ability to execute this maneuver, the bankruptcy court extensively cites to and quotes from three of Professors Brubaker’s articles on the subject: (1) “The Texas Two-Step and Mandatory Non-Opt-Out Settlement Powers,” in the Harvard Law School Bankruptcy Roundtable; (2) “Assessing the Legitimacy of the ‘Texas Two-Step’ Mass-Tort Bankruptcy,” in the Bankruptcy Law Letter; and (3) “Mandatory Aggregation of Mass Tort Litigation in Bankruptcy,” in the Yale Law Journal Forum.

Read the full opinion from the bankruptcy court.

Read “Assessing the Legitimacy of the ‘Texas Two-Step’ Mass-Tort Bankruptcy,” from the Bankruptcy Law Letter, cited in the opinion.

In the pending U.S. Supreme Court case regarding Purdue Pharma’s litigation shield for the Sackler family, the decision of the Court could impact widely used non-debtor releases in Chapter 11 bankruptcy cases. Professor Ralph Brubaker suggested to Bloomberg Law the ruling might affect cases involving mass torts, including cases involving the Catholic diocese, Boy Scouts, Rite Aid, and Highland Capital. The decision’s implications may also extend to asbestos-related bankruptcies and the use of non-consensual third-party releases under Section 524(g) of the bankruptcy code.

Read more from Bloomberg Law.

Ruling in the case Nine West LBO Securities Litigation, the United States Court of Appeals for the Second Circuit cited Professor Ralph Brubaker’s work on safe harbor rules in the Tax Equity and Fiscal Responsibility Act of 1982. The case revolved around the leveraged buyout of an apparel and footwear company, including brands such as Nine West and Anne Klein, and the later bankruptcy filing of the company’s successor. The Second Circuit determined, based on Brubaker’s scholarship, that payroll transfers made by the company that filed for bankruptcy were not covered under the safe harbor rules and vacated the lower court’s decision regarding those claims. 

Read the full opinion.

The bankruptcy deal for Purdue Pharma, in which the Sackler family would pay $6 billion and be shielded from further lawsuits, is a highly charged issue which led to fiery arguments before the Supreme Court. Professor Ralph Brubaker, who has submitted an amicus brief against Purdue Pharma in the case, spoke with several news outlets recently on the particulars of the case. “You can’t just impose settlements on people without their consent by virtue of the vote of other claimants,” he told the BBC. Read more in the articles linked below. 

BBC: Supreme Court considers $6bn deal that shields Sacklers.
UPI: Supreme Court justices appear torn on Purdue Pharma bankruptcy deal.
Harvard Law School Bankruptcy Roundtable and Reorg Podcast: Purdue Pharma Supreme Court Decision.

In the lead-up to oral arguments in the Purdue Pharma case at the Supreme Court, bankruptcy expert and law professor Ralph Brubaker spoke to Bloomberg about the key question at hand.

“Given the court’s existing jurisprudence, I would be personally shocked if they find there is statutory power for what the bankruptcy court approved in the Purdue case,” said Brubaker, who filed an amicus brief against Purdue in the case.

Read the full article at bloomberglaw.com.

The Harvard Law School Bankruptcy Roundtable brings together corporate bankruptcy practitioners with bankruptcy scholars in an online venue to discuss critical issues in corporate bankruptcy. The Roundtable recently published a series on the Purdue Pharma bankruptcy case, where they featured several of the more than thirty briefs filed in the case, giving readers the opportunity to examine the legal and policy arguments for and against third party releases generally and the releases in this particular case. The first post in the series featured a summary of arguments from petitioner United States Trustee William K. Harrington, as well as amici briefs, including one filed by Professor Ralph Brubaker, arguing against a release of liability for the Sackler family.

View the petitioner briefs at Bankrtupcy Roundtable.

Lenders to bankrupt firms are increasingly insisting upon controversial contract clauses known as roll-ups, which boosts investments by moving existing debt to the front of the repayment line. This kind of contract structure prioritizes existing debt repayment, potentially limiting the resources available for lower-ranking creditors. Despite their controversial nature, bankrupt firms and judges overseeing them are compelled to accept roll-ups to avoid complete closure. Although not a new tactic, roll-ups are becoming more prevalent, as seen in the Chapter 11 cases including Bed Bath & Beyond, Vice Media, and a significant deal with Rite Aid. Speaking with Bloomberg, Professor Ralph Brubaker pointed to the dominance of hedge funds and financial firms in negotiating these agreements and suggested rules prohibiting roll-ups might be necessary.

Read the full article on from Bloomberg Law.