What We’re Reading This Week [June 23, 2022]
Reuters reports that the New Jersey bankruptcy judge overseeing the bankruptcy proceedings of Johnson & Johnson subsidiary LTL Management will allowing certain talc tort cases against Johnson & Johnson to proceed while LTL Management proceeds in bankruptcy. Specifically, Judge Michael Kaplan has stated that he may allow some of the 38,000 lawsuits against Johnson & Johnson to continue, despite LTL’s bankruptcy, which lawsuits allege that the company’s talc products caused cancer. Previous decisions in the LTL bankruptcy proceedings found that the automatic stay applicable in that case immediately paused all legal proceedings against both LTL itself and Johnson & Johnson, per Section 362 of the Bankruptcy Code.
On June 15th, the Wall Street Journal reported on the Federal Reserve’s decision to raise interest rates by 0.75 percentage points, the largest one-time increase since 1994. Such move raises the Federal Reserve’s benchmark federal funds rate to a range between 1.5% and 1.75%. Federal Reserve Chairman Jerome Powell stated that the bank’s ultimate goal is to reduce inflation to 2% based on which experts predict the Fed to further raise rates further to as high as 3% by later this year. Chairman Powell also warned that it is becoming increasingly unlikely that the economy will achieve a “soft landing” (i.e., avoiding a recession while the Fed nonetheless continues to raise interest rates). The Federal Reserve has indicated that it is seeking to reduce the amount of market volatility that could persist until inflation is curbed and to restore price stability.
Bloomberg reports on June 14th that EV-Truck startup Electric Last Mile has filed for Chapter 7 bankruptcy relief in the District of Delaware Bankruptcy Court. The filing marks the first bankruptcy by an electric-vehicle startup, that went public via a SPAC transaction. The startup’s founders had planned to import electric delivery vans from China and assemble them in Indiana but had to resign in February amid accusations of improper stock purchases before the SPAC merger. The company listed $100 million assets and $100 million liabilities in its petition. Unlike a typical chapter 11 filing, the filing of a chapter 7 petition will provide a path towards liquidation, rather than reorganization, of the company.
On June 15th, Bloomberg Law reported that drug manufacturer Mallinckrodt Plc. is finally close to exiting Chapter 11 protection. The company filed its chapter 11 petition in October 2020, in the District of Delaware and had already spent $100 million by 2020 in fighting opioid-related lawsuits. Since entering bankruptcy, the Company was further accused of price gouging and proffering questionable third party releases in its plan of reorganization. Nonetheless, the Bankruptcy Court confirmed a plan which will allow the Debtor to slash a considerable amount of its debt amount.
