Both the Johnson & Johnson and InfoWars bankruptcies are filed to address tort lawsuits.

Johnson & Johnson’s bankruptcy survives a motions to dismiss.[Fn. 1] InfoWars’ bankruptcy doesn’t.[Fn. 2]

What follows is an effort to compare and contrast the two cases, revealing why one survives and the other doesn’t.

The Businesses

–Johnson & Johnson

Is the § 363(m) limit on appeal of a sale order “subject to waiver”?

That’s the essential question before the U.S. Supreme Court in MOAC Mall Holdings LLC v. Transform Holdco LLC, Case No. 21-1270 (certiorari granted June 27, 2022).

A deep circuit split exists on whether the § 363(m) limitation is, (i) on an appellate court’s jurisdiction, or (ii) on remedies an appellate court can provide.[Fn. 1]

In large, complex bankruptcy cases:

• The mediator must have a plan;
• Otherwise, the mediator is going to get run over;
• These are tough cases with very experienced lawyers who often have significant resources to put into the fight; and
• The mediator has to be just as resourceful, just as strong, just as ready to engage as the lawyers.

That’s the view expressed by Judge Gerald Rosen (Chief Judicial Mediator in City of Detroit bankruptcy) [fn.1] in a May 2021 interview on the mediation process in the Detroit bankruptcy [fn. 2].

Congress and the President finally extend the $7.5 million debt limit for Subchapter V eligibility:

• by “unanimous consent” in the Senate;
• by a vote of 392 – 21 in the House; and

A legislative history of the new law is at this link.

The new law is bi-partisan and uncontroversial. But there are some bells and whistles, as discussed below.

“SUNSET” – Again!

It seems like a small thing: Chapter 11 debtors in two states paying lower quarterly fees than Chapter 11 debtors in the other 48 states.

What’s the big deal?

Alabama and North Carolina throw a political hissy fit, three or four decades ago. They want their own Bankruptcy Administrator system (not the U.S. Trustee system established everywhere else). And they are rewarded. The reward includes lower quarterly fees.

Where’s the harm in lower quarterly fees? What follows is an attempt to:

“The Congress shall have Power To . . . establish . . . uniform Laws on the subject of Bankruptcies throughout the United States.”

–U.S. Constitution’s Bankruptcy Clause (Art. 1, Sec. 8, cl. 4).

An Old Losing Streak—Article III

“No State shall . . . pass any . . . Law impairing the Obligation of Contracts.”

–Art. I, Sec. 10, U.S. Constitution

Increasingly, states are expanding their laws on debtor/creditor relationships, such as receiverships and assignments for benefit of creditors.

Some of these expansions look suspiciously like a Bankruptcy Code Lite—e.g., adding “stay” provisions.

And that can be a constitutional problem, according to long-standing (and recent) opinions of the U.S. Supreme Court.

What follows is a brief summary of three such opinions.

This is reality:

• Small businesses reorganize, all the time, under Subchapter V;
• Farmers reorganize, all the time, under Chapter 12; and
• Large businesses reorganize, all the time, under regular Chapter 11.

That’s because all of those three types of debtors have bankruptcy reorganization processes designed specifically for them.

Middle Market Debtors

What the heck does this mean:

“(1) Debtor.—The term ‘debtor’— . . . (B) does not include— . . . (Iii) any debtor that is an affiliate of an issuer, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)”

—from Subchapter V’s eligibility statute, § 1182 (emphasis added).

Since the inception of Subchapter V, I’ve been trying to figure that meaning out.

Here’s the progression of thinking:

How are private practice mediators compensated in a bankruptcy case—procedurally?

We have a new court order providing guidance on how such procedures can work.

The new guidance is from Sears Holding Corp. v. Lampert (In re Sears Holdings Corp.), Adv. Pro. No. 19-08250, SDNY Bankruptcy Court. 

Mediation Order