What We’re Reading This Week [May 3, 2022]
The Wall Street Journal reports on the surprise Thursday announcement from the U.S. Commerce Department that the U.S. gross domestic product unexpectedly shrank at a 1.4% annualized rate during the first quarter of 2022. The WSJ does not expect the GDP report to alter the Federal Reserve’s plan to raise interest rates this year, including at its upcoming meeting this week. Meanwhile, some are concerned that that this could be the start of a period of stagflation—stagnant economic growth combined with high inflation that, together, significantly weakens purchasing power. [WSJ; April 28, 2022]
Reuters provides an update on the Sackler family’s latest efforts to finalize settlements and obtain releases of opioid-related claims in connection with 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 an appeal of the Bankruptcy Court’s plan confirmation order, rejected the plan, holding that the non-consensual releases in favor of the Sackler family were unlawful. Purdue appealed further to the Court of Appeals for the Second Circuit, which held oral argument this past Friday. At the argument, the Sackler family representatives noted that their contribution had been increased to $6 billion while also arguing that settlements of this nature, including non-consensual releases of claims under a chapter 11 plan, are not prohibited under the U.S. Bankruptcy Code. A decision from the Second Circuit could have widespread implications, not just for the Purdue bankruptcy case but as to the lawfulness of non-consensual plan releases more broadly. [Reuters; April 29, 2022]
Law360 discusses recent developments in the chapter 11 bankruptcy cases of three non-operating affiliates of Alex Jones’ InfoWars enterprise. Bankruptcy Judge Lopez of the Southern District of Texas scheduled the U.S. Trustee’s and tort claimants’ motions to dismiss the three bankruptcy cases for May 27, and stated that those motions would be heard before the InfoWars debtors’ motion to appoint trustees for 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 a 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 the litigation trusts, over time, for the settlement of defamation claims brought against Jones and InfoWars. [Law360; April 29, 2022]
SCOTUSBlog notes that the U.S. Supreme Court just agreed to hear a case that poses the question of whether Section 523(a)(2)(A) of the Bankruptcy Code may be used to exclude debts from an individual debtor’s discharge on the basis of “imputed fraud.” This provision of the Bankruptcy Code allows creditors to seek to exclude debts incurred via “false pretenses, a false representation, or actual fraud” from an individual debtor’s bankruptcy discharge, rendering such debts permanently nondischargeable. By granting certiorari as to this case, the Supreme Court is positioned to resolve a circuit split as to whether fraud can be imputed to an individual who was entirely unaware of any wrongdoing, thereby rendering the innocent individual permanently liable for the fraud of another individual despite obtaining a discharge of other debts. [SCOTUSBlog; May 2, 2022]
