SILENCING LITIGATION THROUGH BANKRUPTCY Pamela

1261

SILENCING LITIGATION THROUGH BANKRUPTCY

Pamela Foohey* & Christopher K. Odinet**

Bankruptcy is being used as a tool for silencing survivors and their

families. When faced with claims from multiple plaintiffs related to

the same wrongful conduct that can financially or operationally

crush the defendant over the long term—a phenomenon we identify

as onslaught litigation—defendants harness bankruptcy’s

reorganization process to draw together those who allege harm and

pressure them into a swift, universal settlement. In doing so, they use

the bankruptcy system to deprive survivors of their voice and the

public of the truth. This Article identifies this phenomenon and

argues that it is time to rein in this destructive use of bankruptcy.

Whereas the current literature largely discusses mass tort

bankruptcy from a doctrinal, constitutional, or economic

perspective, this Article examines how bankruptcy proceedings like

these cause direct harms to survivors, to public trust in the justice

system, and to the corporate economy. It traces the evolution of

defendants’ use of bankruptcy to resolve mass torts from asbestos,

IUD, and breast implant product liability litigation to its present-

day use in controversies involving the Catholic Church, Purdue

Pharma, the Weinstein Companies, USA Gymnastics, the Boy Scouts

of America, Alex Jones’s Infowars, and Johnson & Johnson. The

Article shows how the prior use of reorganization for mass torts

created the necessary conditions to allow defendants to use

bankruptcy to silence people and facilitate cover-ups in a wider

variety of onslaught litigation. It concludes with a normative

proposal for the narrow circumstances in which courts should allow

bankruptcy to be used to deal with onslaught litigation, while still

preserving the voices of those harmed.

* Professor of Law, Benjamin N. Cardozo School of Law, Yeshiva University.

** Josephine R. Witte Professor of Law and Affiliate Professor of Finance, University of

Iowa.

The Authors thank Ralph Brubaker, Melissa Jacoby, Edward Janger, Jonathan Lipson,

Diane Lourdes Dick, Thomas Gallanis, Andy Grewal, Derek Muller, Todd Pettys, Anya

Prince, John Reitz, Maya Steinitz, Sean Sullivan, and the other participants of the Summer

Faculty Workshop Series at the University of Iowa College of Law for their helpful comments,

1262 Virginia Law Review [Vol. 109:1261

INTRODUCTION ............................................................................ 1262

I. ONSLAUGHT LITIGATION OUTSIDE BANKRUPTCY .................... 1269

A. Resolving Lawsuits Generally ........................................ 1270

B. Resolving Lawsuits Through Class Actions

and Multidistrict Litigation ........................................... 1273

1. Class Actions ............................................................ 1275

2. Multidistrict Litigation .............................................. 1276

II. ONSLAUGHT LITIGATION INSIDE BANKRUPTCY ...................... 1279

A. Chapter 11 Reorganization Basics, Onslaught

Litigation Edition .......................................................... 1280

B. The Perks of Using Chapter 11 for Onslaught

Litigation ....................................................................... 1284

C. From Asbestos to IUDs and Breast Implants ................. 1287

1. The Emergence of Bankruptcy as an

Onslaught Litigation Tool ...................................... 1287

2. Honing the Bankruptcy Tool ..................................... 1290

3. Charging Forward Despite Calls for Caution .......... 1294

III. CASE STUDIES IN SILENCING OF ONSLAUGHT LITIGATION ..... 1296

A. Sexual Abuse and Harassment: Catholic Dioceses ........ 1297

B. Widespread Wrongdoings: Purdue Pharma ................... 1304

C. Beyond Product Liability: Infowars and Alex Jones ...... 1308

IV. BANKRUPT SILENCING .......................................................... 1313

A. Procedural Justice and Bankruptcy ............................... 1313

B. Harms of Bankrupt Silencing ......................................... 1317

V. ENSURING VOICE IN BANKRUPTCY ......................................... 1324

CONCLUSION ............................................................................... 1330

INTRODUCTION

“I do not forgive you.”

That is what over two dozen individuals told three members of the

Sackler family, the owners of the now-notorious Purdue Pharma drug

company, as part of a larger recounting of how the immensely addictive

critiques, and suggestions on earlier versions of this Article. The Authors also thank Madison

Hall (Iowa Law Class of 2024) for her excellent research and editorial support. Any errors

belong to the Authors alone.

Jeremy Hill, ‘I Do Not Forgive You:’ Opioid Victims Address Sacklers Directly,

Bloomberg (Mar. 10, 2022), https://www.bloomberg.com/news/articles/2022-03-10/sacklers-

to-hear-from-opioid-victims-live-in-bankruptcy-court [https://perma.cc/2EHY-S4VW].

2023] Silencing Litigation Through Bankruptcy 1263

painkiller OxyContin destroyed lives and killed loved ones.

The Sacklers

had to confront, in person, stories of dead children, lost spouses, and

babies born with opioid dependencies.

This opportunity for survivors and families of victims to be heard took

place during Purdue Pharma’s chapter 11 bankruptcy case through which

it sought to reorganize.

Survivors and their families fought hard for the

chance to face the Sacklers directly, which may ring as atypical for a legal

proceeding that would resolve the claims that they held against Purdue

Pharma and the Sacklers.

That they asked and were allowed to confront

the Sacklers as part of Purdue Pharma’s reorganization proceeding indeed

was atypical for a bankruptcy case and also was unusual of most civil

lawsuits. But the essence of what survivors and families of victims

sought—for their allegations to be heard and to have some closure

regarding their experiences—is precisely part of what the Sacklers were

trying to avoid via Purdue Pharma’s chapter 11 case.

The Sacklers were not misguided in their expectations of what

bankruptcy might provide them. That survivors and their families—in

bankruptcy terms, claimants or creditors—had a voice in Purdue

Pharma’s reorganization, including vis-à-vis related third parties like the

Sacklers, was extraordinary. Some claimants in Purdue Pharma received

confrontational justice. More typical of civil lawsuits, including

multidistrict litigation of complex cases, is that plaintiffs have a robust

ability, through their counsel, to engage in discovery about the alleged

harms, to participate in the litigation, and to possibly gain some closure.

This process for the vindication of rights provides procedural justice,

which supports the participation and dignity values that are vital for

people to perceive legal processes as legitimate, and which is part of the

fundamental constitutional principle of due process.

Without procedural

justice, those who allege harm suffer further from an inability to “have

Id.; see also Brian Mann, For the First Time, Victims of the Opioid Crisis Formally

Confront the Sackler Family, NPR (Mar. 10, 2022, 4:51 PM), https://www.npr.org/2022/

03/10/1085174528/sackler-opioid-victims [https://perma.cc/6X8K-MRVB] (detailing the

testimonies).

Hill, supra note 1.

Id.

See Mann, supra note 2 (noting the Sacklers’ lack of an apology for years during the opioid

crisis).

See Pamela Foohey, A New Deal for Debtors: Providing Procedural Justice in Consumer

Bankruptcy, 60 B.C. L. Rev. 2297, 2313–16 (2019) (discussing procedural justice); David

Resnick, Due Process and Procedural Justice, in 18 Nomos 206 (J. Roland Pennock & John

W. Chapman eds., 1977) (linking due process and procedural justice); infra Section IV.A.

1264 Virginia Law Review [Vol. 109:1261

their wills ‘counted’[] in societal decisions they care about,” and people

more generally lose faith in the legal system.

The disappearance of

opportunities for would-be plaintiffs to litigate their claims against

defendants like the Sacklers when businesses seek to reorganize is exactly

why for-profit and nonprofit corporations,

and the people associated with

those businesses, are increasingly using chapter 11 to deal with what we

term in this Article onslaught litigation.

Onslaught litigation, as we define the term, refers to alleged wrongful

conduct that produces claims from multiple plaintiffs against the same

defendant or group of defendants. When collected, the magnitude of

claims and lawsuits presents the possible financial or operational

crippling of the defendants over the long-term, or else will require the

defendant to devote tremendous operational resources and time to the

litigation because of its public saliency. Mass tort litigation is an example

of onslaught litigation, such as the opioid liability faced by Purdue

Pharma and the Sacklers, or the asbestos multidistrict and class action

litigation that started in the 1980s.

Victor D. Quintanilla & Michael A. Yontz, Human-Centered Civil Justice Design:

Procedural Justice and Process Value Pluralism, 54 Tulsa L. Rev. 113, 115, 140–41 (2018)

(quoting Frank I. Michelman, The Supreme Court and Litigation Access Fees: The Right to

Protect One’s Rights—Part I, 1973 Duke L.J. 1153, 1172).

In this Article, we generally use the term “corporation” to refer to the for-profit and

nonprofit business entities that file chapter 11. Although not all businesses that have filed

chapter 11 are organized as corporations, such as some of the Catholic dioceses, the majority

are. For simplicity, we refer to businesses as “corporations.”

This term is inspired by the U.S. Court of Appeals for the Second Circuit’s discussion of

the trust established in Johns-Manville’s chapter 11 case, which it filed to deal with mass tort

litigation. Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 640 (2d

Cir. 1988) (“[T]he Plan seeks to ensure that health claims can be asserted only against the

Trust and that Manville’s operating entities will be protected from an onslaught of crippling

lawsuits that could jeopardize the entire reorganization effort.” (emphasis added)). Jonathan

Lipson recently similarly defined what he terms “social debt” bankruptcies: “Social debt is

financial liability for serious (e.g., criminal) misconduct, often involving violations of health

and safety laws, made unsustainable due to persistent governance failures of transparency and

accountability.” Jonathan C. Lipson, The Rule of the Deal: Bankruptcy Bargains and Other

Misnomers, 97 Am. Bankr. L.J. 41, 43 (2023) [hereinafter Lipson, The Rule of the Deal]. Our

definition of “onslaught litigation” is broader. It focuses less on the normative qualities of the

underlying harms and more on the operational and time resources, including public relations

resources, that a corporation may project it will have to devote to the litigation. Onslaught

litigation includes violations of health and safety laws, sexual harassment, and criminal

misconduct, but also may include, for example, allegations of underpaying workers, of price

fixing, or of deceptive trade practices.

Infra Sections II.C, III.B.

2023] Silencing Litigation Through Bankruptcy 1265

Although onslaught litigation typically presents as mass tort claims, it

encompasses many more kinds of lawsuits.

It includes claims stemming

from alleged harms that affect a smaller group of people and may yield

only a handful of lawsuits, but which reflect very poorly on a corporation

and its directors, officers, and owners. Examples of this type of onslaught

litigation include allegations of rampant sexual abuse and harassment,

such as Harvey Weinstein’s abuse and harassment of almost one hundred

women.

Onslaught litigation also encompasses the prominent

defamation cases against Alex Jones and Infowars for Jones’s repeatedly

calling the 2012 shooting at the Sandy Hook Elementary School in

Connecticut a “giant hoax.”

The critical connection among these examples is the significance of the

accusations and lawsuits to a corporation’s continued smooth functioning

now or continued function in the future. Magnitude refers both to the

number of potential lawsuits, such as with mass torts, and to the public

outrage and shock over even a few allegations and lawsuits. The

prominence and public saliency of the allegations make the resulting

lawsuits onslaught litigation. When faced with onslaught litigation,

corporations’ directors, officers, and owners naturally want to truncate the

lawsuits and minimize additional public discussion of the allegations.

Reorganizing via chapter 11 promises to collect and resolve most or all

of the lawsuits and claims arising from the alleged wrongdoing. It also

has the potential to decrease information available to the public about the

allegations.

When corporations file chapter 11 in the wake of onslaught

Mass tort litigation refers to the situation where many individuals have tort-based claims

against a single or a handful or persons (or entities). See Douglas G. Smith, Resolution of

Mass Tort Claims in the Bankruptcy System, 41 U.C. Davis L. Rev. 1613, 1616–26 (2008)

(overviewing mass tort litigation); infra Section I.B.

See Amelia Schonbek, The Complete List of Allegations Against Harvey Weinstein,

N.Y.: The Cut (Jan. 6, 2020), https://www.thecut.com/2020/01/harvey-weinstein-complete-

list-allegations.html [https://perma.cc/KE2C-Z5KK] (listing allegations).

Alex Jones, Infowars, and the Sandy Hook Defamation Suits, First Amend. Watch (Dec.

2, 2022), https://firstamendmentwatch.org/deep-dive/alex-jones-infowars-and-the-sandy-hoo

k-defamation-suits [https://perma.cc/YX2J-BTJN].

A chapter 11 filing, initially, will require a corporation to disclose more information than

it would be required to disclose in civil litigation, especially given the use of protective orders.

This Article is concerned with the totality of information that may be exposed via news stories

about litigation and through litigation filed over decades, which a chapter 11 filing will cut

off. Stated differently, corporations are trading the possibility of alleged wrongdoings

circulating in the public for decades (or longer) for chapter 11’s immediate, short-term, and

predictable information disclosure.

1266 Virginia Law Review [Vol. 109:1261

litigation, what they seek is two-fold: to bypass procedural justice and to

shut down discussion of their purported wrongdoings.

Based on past chapter 11 proceedings, corporations’ directors and

officers expect that negotiations will be allowed to take place between

only a subset of parties, that discovery requests can be pushed back

against forcefully, and that requests for examiners can be successfully

fought. They also expect that related claims against business entities and

people arising from the alleged wrongdoings that do not file bankruptcy

will be swept into the reorganization case. They further expect that calls

for shortening the reorganization process will be heeded and that

bankruptcy law provisions designed to ensure claimants can vote on the

proposed plan will only be nominally followed—usually under the guise

of ensuring that victims receive as much money as possible.

Silencing people and sweeping the alleged harms under the proverbial

rug become a byproduct of reassurances about making sure that victims

are treated well. But it is the corporation and its leaders that benefit, not

the people who they hurt. The chapter 11 case will end with a forever

resolution of onslaught litigation claims against the corporation and third

parties and with little public understanding of what the corporation sought

to escape through bankruptcy. The corporation (and its owners) will

continue to operate, effectively freed from its wrongdoing.

This Article argues that it is time for this destructive, targeted use of

bankruptcy to be reined in and proposes how to limit and control those

chapter 11 cases filed with a primary purpose of resolving onslaught

litigation. In the past decade, chapter 11 cases filed to deal with onslaught

litigation have made headline news. Some of these filings are discussed

in the media and literature as mass tort bankruptcy cases such as: Catholic

dioceses,

the Boy Scouts of America,

and Purdue Pharma.

Others

involve onslaught litigation that may not be characterized as mass tort

See infra Part II for an overview of chapter 11 as applied to onslaught litigation.

Rebecca Klapper, 4 New York Dioceses File for Bankruptcy Due to Flood of Sexual

Abuse Lawsuits, Newsweek (Aug. 13, 2021, 9:42 AM), https://www.newsweek.com/4-new-

york-dioceses-file-bankruptcy-due-flood-sexual-abuse-lawsuits-1619136 [https://perma.cc/

4G67-MLMT].

Cara Kelly, Nathan Bomey & Lindsay Schnell, Boy Scouts Files Chapter 11 Bankruptcy

in the Face of Thousands of Child Abuse Allegations, USA Today (May 18, 2020, 4:51 PM),

https://www.usatoday.com/in-depth/news/investigations/2020/02/18/boy-scouts-bsa-chapter-

11-bankruptcy-sexual-abuse-cases/1301187001 [https://perma.cc/M9Q7-WMH5].

Jan Hoffman & Mary Williams Walsh, Purdue Pharma, Maker of OxyContin, Files for

Bankruptcy, N.Y. Times (Nov. 24, 2020), https://www.nytimes.com/2019/09/15/health/

purdue-pharma-bankruptcy-opioids-settlement.html [https://perma.cc/7BMJ-S366].

2023] Silencing Litigation Through Bankruptcy 1267

litigation: Bikram Yoga,

the Weinstein Companies,

USA

Gymnastics,

and Remington and Infowars after the Sandy Hook

shooting.

More recently, Johnson & Johnson (“J&J”) and 3M

strategically placed certain of their corporate entities into bankruptcy to

deal with onslaught litigation about particular products—claims that

talcum powder caused cancer in hundreds of thousands of women in

J&J’s case and claims that military earplugs harmed United States

servicemembers in 3M’s case.

Scholars have recently written about the problems inherent in using the

chapter 11 process to deal with mass tort liabilities, including issues

related to third-party releases, judge shopping, bypassing procedures, and

Tracy Rucinski, Bikram Yoga Guru Seeks Bankruptcy in Wake of Harassment Claims,

Reuters (Nov. 10, 2017, 3:55 PM), https://www.reuters.com/article/us-bikram-choudhury-

yoga-bankruptcy/bikram-yoga-guru-seeks-bankruptcy-in-wake-of-harassment-claims-

idUSKBN1DA2SA [https://perma.cc/9U6P-5FP2].

Brooks Barnes, Weinstein Company Files for Bankruptcy and Revokes Nondisclosure

Agreements, N.Y. Times (Mar. 19, 2018), https://www.nytimes.com/2018/03/19/business/

weinstein-company-bankruptcy.html [https://perma.cc/TE8R-MMBV].

Rachel Axon, Nancy Armour & Tim Evans, USA Gymnastics Files for Bankruptcy, a

Move Related to Larry Nassar’s Sexual Abuse Lawsuits, USA Today (Dec. 5, 2018, 5:40 PM),

https://www.usatoday.com/story/sports/olympics/2018/12/05/usa-gymnastics-files-bankruptc

y-nassar-lawsuits/2218546002 [https://perma.cc/3GEG-HBS3].

Sarah Jorgensen, Jason Hanna & Erica Hill, Sandy Hook Families Reach $73 Million

Settlement with Gun Manufacturer Remington, CNN (Feb. 16, 2022, 5:04 AM),

https://www.cnn.com/2022/02/15/us/sandy-hook-shooting-settlement-with-remington/index.

html [https://perma.cc/BPT4-NFVJ]; Derrick Bryson Taylor, Alex Jones’s Infowars Files for

Bankruptcy, N.Y. Times (Apr. 18, 2022, 5:15 PM), https://www.nytimes.com/2022/04/18/us/

alex-jones-infowars-bankruptcy.html [https://perma.cc/2KJR-TWD3].

Johnny Magdaleno, Major Bankruptcy Case Hits Indianapolis as Veterans Claim Combat

Earplugs Were Faulty, IndyStar (Aug. 17, 2022, 7:21 AM), https://www.indystar.com/story/

news/2022/08/16/major-bankruptcy-case-hits-indianapolis-veterans-sue-3m-subsidiary/6540

4066007 [https://perma.cc/8KP3-5TCH]; Brian Mann, Rich Companies Are Using a Quiet

Tactic to Block Lawsuits: Bankruptcy, NPR (Apr. 2, 2022, 7:00 AM), https://www.npr.org/

2022/04/02/1082871843/rich-companies-are-using-a-quiet-tactic-to-block-lawsuits-bankrup

tcy [https://perma.cc/R5QT-JCG6]. The Third Circuit subsequently dismissed J&J’s corporate

entity’s case as a bad-faith filing. See infra note 120 and accompanying text. On April 4, 2023,

J&J filed the same corporate entity in chapter 11 for a second time and, in doing so, proposed

a $8.9 billion settlement. Evan Ochsner, Cancer Victims’ Lawyers Vow to Fight J&J Proposed

Settlement, Bloomberg L. (Apr. 6, 2023, 1:40 PM), https://news.bloomberglaw.com/bankrupt

cy-law/cancer-victims-lawyers-vow-to-fight-j-j-proposed-settlement [https://perma.cc/5PV

D-XTL6]. Ralph Brubaker characterized the filing as a “rather audacious ploy.” Steven

Church & Jef Feeley, J&J Begins ‘Audacious’ Return to Failed Cancer Settlement Tactic,

Bloomberg L. (Apr. 5, 2023, 12:28 PM), https://news.bloomberglaw.com/bankruptcy-law/j-j-

begins-audacious-return-to-failed-cancer-settlement-tactic [https://perma.cc/THA9-L7VP].

1268 Virginia Law Review [Vol. 109:1261

the much-decried Texas Two-Step.

But the role of the bankruptcy

system in people losing their ability to take part in litigation and the

damage to procedural justice has been given short shrift—particularly in

the wider context of onslaught litigation which may or may not be

categorized as arising from a mass tort. Likewise absent from discussion

in the literature is the way in which denying survivors a voice in onslaught

litigation reorganization cases prevents light from being shed on problems

such that the company (and its owners) can cabin how much public

scrutiny they face.

This Article brings those concerns to the forefront. It thereby advances

the literature from a discussion of mass tort bankruptcies largely tied to

bankruptcy law provisions, constitutional concerns, and a traditional view

of reorganization as a monetary-value-preserving venture,

to an

See generally Melissa B. Jacoby, Sorting Bugs and Features of Mass Tort Bankruptcy,

101 Tex. L. Rev. (forthcoming 2023) (manuscript at 3) [hereinafter Jacoby, Sorting Bugs and

Features], https://ssrn.com/abstract=4323151 [https://perma.cc/EG3B-7378] (detailing the

extraordinary relief that corporations seek in bankruptcy, with a focus on mass tort

bankruptcies); Jonathan C. Lipson, First in Time; First is Right: Comments on Levitin’s

Poison Pill, 101 Tex. L. Rev. Online 33, 34 (2022) [hereinafter Lipson, First in Time]

(discussing Adam Levitin’s article, Purdue’s Poison Pill, and third-party releases, appellate

review, and venue); Ralph Brubaker, Mandatory Aggregation of Mass Tort Litigation in

Bankruptcy, 131 Yale L.J.F. 960, 964–66 (2022) [hereinafter Brubaker, Mandatory

Aggregation of Mass Tort Litigation in Bankruptcy] (advocating prohibiting nonconsensual

third-party releases); Michael A. Francus, Texas Two-Stepping Out of Bankruptcy, 120 Mich.

L. Rev. 38, 38–39 (2022) (discussing the Texas Two-Step, fraudulent transfer law, and good-

faith challenges to chapter 11 filings); Adam J. Levitin, Purdue’s Poison Pill: The Breakdown

of Chapter 11’s Checks and Balances, 100 Tex. L. Rev. 1079, 1083–84 (2022) [hereinafter

Levitin, Purdue’s Poison Pill] (discussing coercive restructuring techniques, lack of appellate

review, and forum shopping); Samir D. Parikh, The New Mass Torts Bargain, 91 Fordham L.

Rev. 447, 455 (2022) [hereinafter Parikh, The New Mass Torts Bargain] (overviewing the

intersection of mass torts and bankruptcy); Samir D. Parikh, Scarlet-Lettered Bankruptcy: A

Public Benefit Proposal for Mass Tort Villains, 117 Nw. U. L. Rev. 425, 429–31 (2022)

[hereinafter Parikh, Scarlet-Lettered Bankruptcy] (proposing that companies facing mass torts

that file bankruptcy emerge as public benefit corporations); Lindsey D. Simon, Bankruptcy

Grifters, 131 Yale L.J. 1154, 1159–61 (2022) [hereinafter Simon, Bankruptcy Grifters]

(detailing how and when third-party releases should be granted); Melissa B. Jacoby, Shocking

Business Bankruptcy Law, 131 Yale L.J.F. 409, 411–12 (2021) [hereinafter Jacoby, Shocking

Business Bankruptcy Law] (pinpointing the harms of “off-label bankruptcy” and “bankruptcy

à la carte,” including third-party releases); Adam J. Levitin, The Texas Two-Step: The New

Fad in Fraudulent Transfers, Credit Slips (July 19, 2021, 10:50 AM) [hereinafter Levitin, The

Texas Two-Step], https://www.creditslips.org/creditslips/2021/07/the-texas-two-step.html

[https://perma.cc/MUQ2-AJDQ] (detailing the mechanics of the Texas Two-Step).

A few scholars have called out and deviated from this more traditional focus. See Jacoby,

Sorting Bugs and Features, supra note 24 (manuscript at 11) (emphasizing the non-economic

constitutional rights of future claimants); Jonathan C. Lipson, “Special”: Remedial Schemes

2023] Silencing Litigation Through Bankruptcy 1269

examination of the direct harms to people and public trust in corporations.

It also expands the discussion of chapter 11 cases filed in the wake of

litigation from mass torts to the broader context of our concept of

onslaught litigation. It thus links headliner chapter 11 filings from the past

couple of decades with a full history of mass tort bankruptcies in a manner

not yet explored, but which underscores and explicates an integral

motivator of recent chapter 11 filings that have provoked outrage and calls

for a reexamination of the business bankruptcy system.

To make these points—and to explain our solutions—the Article

proceeds as follows. Part I overviews how a corporation would resolve

onslaught litigation, with a focus on mass tort cases, outside of the

bankruptcy system. Part II compares this to how corporations can manage

onslaught litigation in the bankruptcy system, including tracing the

evolution of chapter 11’s use to deal with mass torts from asbestos

litigation through intrauterine device (“IUD”) and breast implant product

liability litigation. Part III relies on three case studies—Catholic dioceses,

Purdue Pharma, and Infowars and Alex Jones—to build on how the prior

use of bankruptcy to deal with mass torts has created the necessary

conditions to allow defendants to leverage chapter 11 to silence victims

and facilitate cover-ups in a wider variety of onslaught litigation. Part IV

turns to a detailed explanation of the problems—the denial of victims’

voices, the destruction of procedural justice, and the suppression of

information. Part V offers solutions. Although solving bankruptcy’s

silencing problem may, almost necessarily, require more costly and

longer reorganization cases, we argue that such a cost is worth it for

people to have a voice and for upholding the integrity of both the justice

system and the corporate economy.

I. O

NSLAUGHT LITIGATION OUTSIDE BANKRUPTCY

Corporate defendants increasingly try to use bankruptcy to resolve

certain kinds of legal actions that we term onslaught litigation. As noted,

we define onslaught litigation as alleged wrongful conduct that leads a

in Mass Tort Bankruptcies, 101 Tex. L. Rev. 1773, 1778 (2023) [hereinafter Lipson, Remedial

Schemes], (assessing “what actually happened in Purdue Pharma along familiar dimensions

of ‘exit,’ ‘voice,’ and ‘loyalty’” (citing John C. Coffee, Jr., Class Action Accountability:

Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 Colum. L. Rev. 370,

376 (2000))); Lipson, Rule of the Deal, supra note 9, at 44 (interrogating questions of

transparency and accountability in “social debt” bankruptcies); infra notes 299–302 and

accompanying text.

1270 Virginia Law Review [Vol. 109:1261

person or organization to face legal claims from multiple parties, all of

which stem from the same or similar conduct and where the net effect of

the totality of litigation is of such a magnitude that it has the likelihood of

causing the defendant’s financial collapse or of requiring the defendant to

devote significant operational resources and time to the litigation in part

because of its public saliency.

Onslaught litigation typically has a public

relations component that accompanies allegations of wrongdoing.

addition, multiple defendants involved in the same common conduct may

be named in the resulting civil and criminal actions, such as the

corporation, related corporate entities, and their owners. Corporate

directors, officers, and owners may worry that they will be tried in state

and federal courts, as well as the court of public opinion.

In contrast to onslaught litigation, for instance, multiple claims from

suppliers against a corporation stemming from similar contract issues,

although potentially expensive to resolve, are unlikely to rise to the level

of what corporate officers will experience as onslaught litigation. The

claims instead are a predictable, though unfortunate, cost of doing

business and should not be expected to provoke outrage, particularly

public rebuke, in the way that allegations of knowingly selling a

dangerous product, sexual harassment, abuse, libel, slander, and other

tortious conduct often do.

To understand how corporate defendants benefit from filing

bankruptcy to handle onslaught litigation, it is useful first to consider how

defendants would handle the litigation outside bankruptcy. The remainder

of this Part overviews litigation of the range of onslaught litigation.

Because a sizable portion of onslaught litigation is mass tort litigation, it

emphasizes the resolution of mass tort claims outside bankruptcy.

A. Resolving Lawsuits Generally

Onslaught litigation proceeds the same as any civil lawsuit—pleadings,

discovery, trial, verdict (and award of damages), and possibly an appeal

See supra notes 9–13 and accompanying text.

Even if litigation does not threaten financial or operational collapse or if the underlying

lawsuits have questionable merit, the litigation’s saliency among clients, customers, and the

general public can be sufficient to deem it onslaught litigation. Public saliency and scrutiny

are key to determining which litigation a defendant (or a group of related defendants) would

experience as onslaught litigation.

2023] Silencing Litigation Through Bankruptcy 1271

or multiple appeals.

As a baseline, each individual lawsuit is resolved

separately. At any point, the plaintiffs and defendants may come to

settlements.

Every settlement is unique to the individual lawsuit.

Absent a settlement, a civil lawsuit can take anywhere from a few months

to a few years.

For corporations facing onslaught litigation, as each lawsuit continues,

with every step, the public exposure risk remains.

The allegations make

headline news upon the filing of each case.

Discovery requests bring

news stories. The trial’s start is noteworthy. The verdict, judgments, and

appeals draw out how long the corporation’s misdeeds circulate.

Each lawsuit also takes time away from running a corporation.

And

as each lawsuit concludes, money judgments stack up.

Although

defendants may be able to handle, operationally and financially, the initial

lawsuit or handful of lawsuits, as the timeline and dollar figure for the

resolution of claims extends, corporations’ directors, officers, and owners

grow anxious and may look for a way out of the uncertainty.

In the context of allegations involving multiple plaintiffs and multiple

lawsuits, instead of settling each lawsuit or waiting for it to resolve via a

1 Legal Pros., Inc., Legal Professional’s Handbook ¶ 1221 (2022) (describing the

progression of civil litigation).

Jerry M. Custis, Litigation Management Handbook § 8:24 (2022).

See also John R. Allison, Mark A. Lemley & David L. Schwartz, Understanding the

Realities of Modern Patent Litigation, 92 Tex. L. Rev. 1769, 1777 (2014) (discussing the

particularities of patent litigation settlements).

Jarrett Lewis, Third-Party Litigation Funding: A Boon or Bane to the Progress of Civil

Justice?, 33 Geo. J. Legal Ethics 687, 687 (2020) (“Because of discovery requests and lengthy

trials, litigation can last for years . . . .”).

See Joe Couto, Bungling of Abuse Scandal Weakens the Church’s Voice, ChristianWeek

(May 4, 2010), https://www.christianweek.org/bungling-of-abuse-scandal-weakens-the-churc

hs-voice [https://perma.cc/3D3K-22GD] (noting how the Catholic Church faces media

scrutiny with revelations of sex abuse and how that erodes its “brand”).

See Abbott Koloff & Deena Yellin, Over a Year, More Than 230 Sex Abuse Suits Have

Been Filed in NJ Against the Catholic Church, NorthJersey.com (Dec. 1, 2020, 12:09 PM),

https://www.northjersey.com/story/news/2020/12/01/more-than-230-sex-abuse-suits-filed-ag

ainst-catholic-church-nj/3768960001 [https://perma.cc/D6AY-AYDK] (noting how one

paper examined more than 230 sex abuse lawsuits filed against five Catholic dioceses).

See James Malm, Kenneth W. Soyeh & Srinidhi Kanuri, Litigation Risk and Corporate

Performance, 37 J. Behav. & Experimental Fin., July 2023, at 1 (“Managers of defendant firms

spend much time holding meetings dedicated to lawsuits, which can distract them from

making critical investment decisions.”).

See Jonathan T. Molot, A Market in Litigation Risk, 76 U. Chi. L. Rev. 367, 368–75

(2009) (discussing how businesses attempt to manage litigation risk).

See Malm et al., supra note 34, at 1 (“[L]itigation may affect managerial decision-making

and ultimately interrupt the sustainability of future earnings . . . .”).

1272 Virginia Law Review [Vol. 109:1261

trial, the lawsuits may be coordinated under state civil procedure laws.

A paradigmatic onslaught litigation example in which coordination has

been used relates to lawsuits filed against individual Catholic Church

dioceses on account of sexual abuse allegations over a period of

decades.

The abuse claims arose and were reported over many years.

Dozens, and sometimes hundreds, of lawsuits against a particular diocese

were filed and remained pending over an extended period.

Although

some dioceses settled, dioceses looked for ways to coordinate and

consolidate the pending lawsuits.

For example, to deal with the 850 civil

cases filed against Catholic dioceses in California, the state courts used a

state law process known as civil case coordination.

Coordination in

California is allowed for two or more claims “that share common

questions of fact or law and that are pending in different counties to be

joined in one court.”

The cases were coordinated in a geographic

2 Jane R. Roth, Business and Commercial Litigation in Federal Courts §§ 21:4, 21:10

(Robert L. Haig ed., 5th ed. 2022).

Marie Keenan, Child Sexual Abuse and the Catholic Church: Gender, Power, and

Organizational Culture 3–23 (2012) (overviewing what is known about sexual abuse within

the Catholic Church); John Jay Coll. of Crim. Just., The City Univ. of N.Y., The Nature and

Scope of Sexual Abuse of Minors by Catholic Priests and Deacons in the United States 1950–

2002 (June 2004), https://www.usccb.org/sites/default/files/issues-and-action/child-and-yout

h-protection/upload/The-Nature-and-Scope-of-Sexual-Abuse-of-Minors-by-Catholic-Priests-

and-Deacons-in-the-United-States-1950-2002.pdf [https://perma.cc/CL35-PRKP] (relying on

a survey of Catholic dioceses and religious institutes to document sexual abuse within the

Catholic Church).

The Archdiocese of Baltimore provides an example, where “[m]ore than 150 Roman

Catholic priests in the Archdiocese of Baltimore have been accused of sexually and physically

abusing more than 600 victims over the past 80 years.” Kiara Alfonseca, State Investigation

Identifies 158 Priests Accused of Abuse, Over 600 Victims in Last 80 Years, ABC News (Nov.

18, 2022, 6:04 PM), https://abcnews.go.com/US/probe-identifies-158-priests-accused-abuse-

600-victims/story?id=93565644 [https://perma.cc/RA3A-CDSM].

Id.

For instance, the Catholic Diocese of Albany recently offered a settlement that bypasses

litigation and a potential bankruptcy filing. Brendan J. Lyons, Albany Diocese Offered $20M

for ‘Global Settlement’ with Victims of Abuse, Times Union (Jan. 15, 2023),

https://www.timesunion.com/state/article/Albany-diocese-offered-20M-for-global-17715979

.php [https://perma.cc/2X3C-LGUC].

Cal. Civ. Proc. Code § 404; An Explanation of the Clergy Abuse Litigation in California,

Associated Press (Oct. 9, 2004), https://www.snapnetwork.org/legal_courts/stories/ca_explan

ation_calif_cases.htm [https://perma.cc/JBR8-RCRT].

Civil Case Coordination, Cal. Cts., https://www.courts.ca.gov/27922.htm#howcomplex

[https://perma.cc/6GUD-YE6R] (last visited Dec. 1, 2022) (providing the individual filings

and coordination orders); see also Helen E. Zukin & Melanie Meneses Palmer, Demystifying

Complex-Case Coordination, Advocate (Feb. 2017), https://www.advocatemagazine.com/

2023] Silencing Litigation Through Bankruptcy 1273

manner, separating the cases into groups called Clergy I, Clergy II, and

Clergy III, with each being assigned to a different county district court—

the first two in Southern California and the third group in Northern

California.

Case coordination for onslaught litigation is not without its flaws.

When state courts are used, the ability to consolidate claims and lawsuits

from multiple states is not possible due to jurisdictional constraints. As

explained below, class actions and multidistrict litigation, in comparison,

provide a more efficient and inclusive method to litigate alleged

misconduct affecting multiple people across multiple jurisdictions.

B. Resolving Lawsuits Through Class Actions

and Multidistrict Litigation

Class actions and multidistrict litigation have been used most often

with mass tort claims. This Section overviews these techniques in that

context. Mass tort litigation, as a form of onslaught litigation, arises when

there are numerous plaintiffs with a common defendant and whereby the

tort-based claims of the plaintiffs stem from the same conduct by the

defendant, such as a corporation.

However, this simple description belies the immense complexity of

mass tort litigation. The injuries in mass tort actions are many—physical,

emotional, and psychological—and quite significant. Mass tort cases have

historically involved injuries caused by dangerous or defective consumer

products, large-scale catastrophes, defective prescription drugs and

medical devices, or exposure to toxic substances.

Plaintiffs often are

spread over a large geographic area and their injuries may become

apparent over a protracted timeline. Mass tort litigation usually also

involves multiple actors, ranging from defendants, attorneys, claims

administrators, and litigation financing companies.

Mass tort cases have long presented unique challenges. Plaintiffs come

forward at different points in time. Two people exposed to a product at

the same time may manifest injuries at different times. In cases involving

asbestos exposure, the latency period for asbestos-produced diseases can

article/2017-february/demystifying-complex-case-coordination [https://perma.cc/7LNR-HV

82] (discussing coordination in California).

See An Explanation of the Clergy Abuse Litigation in California, supra note 42.

See supra note 11.

See Parikh, The New Mass Torts Bargain, supra note 24, at 462–63.

Lindsey D. Simon, The Settlement Trap, 96 Ind. L.J. 661, 678–80 (2021).

1274 Virginia Law Review [Vol. 109:1261

be as long as forty years.

In other circumstances, such as sexual abuse

and harassment, that the conduct and injury have occurred is known, but

it may take harmed individuals time to process the harm and come

forward.

Such long latency periods make it difficult for corporations to

estimate the extent of their future liability.

The timelines for injury manifestation and psychological readiness to

come forward also present a quandary for remedying harms. Only those

people who have been injured, know they have been injured, and actually

come forward can have a hand in the distribution of a corporate

defendant’s assets. Those current plaintiffs who successfully bring

actions will deplete the finite corporate resources, leaving little to nothing

for those future plaintiffs. As Samir Parikh has noted, the potential for

unknown claims and liabilities to arise in the future causes corporate

tortfeasors to push for global settlements whereby any and all current and

future claims are settled at a certain set value.

But a global settlement

sets up an anti-commons problem.

The corporation’s finite resources go

to those survivors who are identified and become part of the settlement at

the time.

For those survivors whose injury is latent or have yet to come

forward, the resources available to make them whole will be exhausted

by the time they raise their injury.

Historically, the challenges posed by onslaught litigation in the mass

torts context have been addressed by the consolidation of claims in two

main ways. The more typical is that the actions will go through class

certification under Rule 23 of the Federal Rules of Civil Procedure.

Alternatively, the Judicial Panel on Multidistrict Litigation may, at its

Eduardo C. Robreno, The Federal Asbestos Product Liability Multidistrict Litigation

(MDL-875): Black Hole or New Paradigm?, 23 Widener L.J. 97, 103 (2013).

Statutes of limitations require people to come forward within a certain timeframe.

However, states can change their statute of limitations. Many states have done this for child

sexual abuse in the wake of the exposure of widespread abuse of children in the Catholic

Church. See Marina Pitofsky, Catholic Church Spent $10M on Lobbying to Delay Statute of

Limitations Reforms: Report, The Hill (June 5, 2019), https://thehill.com/blogs/blog-briefing-

room/news/447060-the-catholic-church-spent-10-million-in-lobbying-efforts-to

[https://perma.cc/B4MG-BBFJ] (discussing a report that found the Catholic Church “paid for

lobbying efforts in Pennsylvania, New York, Connecticut, New Jersey, New Hampshire,

Massachusetts, Maine and Rhode Island between 2011 and 2018” to delay these reforms).

See Robreno, supra note 48, at 106–07.

Parikh, The New Mass Torts Bargain, supra note 24, at 451–52.

Id. at 452.

Id.

See id.

2023] Silencing Litigation Through Bankruptcy 1275

discretion, transfer the cases to a single district court for consolidated

proceedings.

1. Class Actions

The Supreme Court has called class actions a “special kind of

litigation.”

Class actions operate under Rule 23, and a large

accompanying body of case law, that provide a way for a court to

determine whether “the named plaintiff’s claim and the class claims are

so interrelated that the interests of the class members will be fairly and

adequately protected in their absence.”

Class actions are particularly

useful when numerous individuals experience the same harm and,

although large in the aggregate, the likely monetary compensation for the

harm itself is relatively small individually.

Although people have been

harmed, because the likely monetary award on account of the harm is not

sufficient to justify an individual plaintiff fronting the necessary

attorney’s fees, or for the harmed individual to find counsel to work on a

contingency fee basis, lawsuits may not be brought.

Class actions permit multiple plaintiffs with the same claim arising

from the same facts to bring their lawsuit together.

If the class is

certified, a single plaintiff will be designated as the class representative

and, with their counsel, will be empowered to bind the rest of the class

members in the resolution of the litigation.

This allows for a larger

damages award in the aggregate, which entices an attorney to take the

cases on a contingency fee basis.

Through the mid-1990s, class certification dominated as the primary

means of resolving mass tort litigation.

When first created, class actions

primarily functioned as a tool to enable more efficient litigation of

claims.

But parties to mass tort litigation recognized the value of class

Id. (listing these alternatives).

Coopers & Lybrand v. Livesay, 437 U.S. 463, 470 (1978).

Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 n.13 (1982).

Adam J. Levitin, Consumer Finance: Markets and Regulation 47–48 (2018).

Id. at 44.

Id. at 47–48.

1 Joseph M. McLaughlin, McLaughlin on Class Actions § 1:2 (19th ed. 2022) (detailing

how a class is certified).

Levitin, supra note 59, at 47–48.

Troy A. McKenzie, Toward a Bankruptcy Model for Nonclass Aggregate Litigation, 87

N.Y.U. L. Rev. 960, 965 (2012).

Id. at 970.

1276 Virginia Law Review [Vol. 109:1261

certification for settlement purposes.

Defendants stood to benefit

tremendously from settlements, which precluded later claims and future

liability.

For instance, in 1984, a class settlement of $180 million was

approved for the claims of military personnel who had been exposed to a

powerful herbicide, Agent Orange, during the Vietnam War.

Many

mass tort cases in the 1990s were resolved via class certification and

settlement.

In the late 1990s, however, the Supreme Court found that the use of

Rule 23 class certification was inappropriate in two asbestos-related cases

because the interests of the class representatives did not adequately align

with the interests of future victims, who would be bound by the settlement

terms and precluded from bringing individual claims despite their distinct

interests.

With these two decisions, the Supreme Court effectively

eliminated the option to resolve the majority of mass tort cases through

class certification and settlement.

Onslaught litigation involving mass

torts needed a new device.

2. Multidistrict Litigation

Over the last twenty years, multidistrict litigation (“MDL”) has

replaced class actions for mass tort cases.

MDL, created in 1968,

brings together large and complicated civil cases scattered across the

country that have common questions of both law and fact into a single

court for purposes of pre-trial procedures.

When petitioned, a panel of

seven federal judges appointed by the Chief Justice of the U.S. Supreme

Court can transfer all of these cases to a single court if the panel

Richard A. Nagareda, Mass Torts in a World of Settlement 72 (2007).

Id. at 73.

Id. at 74.

Parikh, The New Mass Torts Bargain, supra note 24, at 472.

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625–27 (1997); Ortiz v. Fibreboard

Corp., 527 U.S. 815, 854–56 (1999).

Parikh, The New Mass Torts Bargain, supra note 24, at 472–73.

Id. at 475. “Non-class” aggregate litigation also has become a substitute for class actions.

See Jonathan C. Lipson, The Secret Life of Priority: Corporate Reorganization after Jevic, 93

Wash. L. Rev. 631, 659 (2018) (noting potential problems with this litigation).

The first MDL was In re Eisler Patents, 297 F. Supp. 1034 (J.P.M.L. 1968). Daniel S.

Wittenberg, Multidistrict Litigation: Dominating the Federal Docket, A.B.A. (Feb. 19, 2020),

https://www.americanbar.org/groups/litigation/publications/litigation-news/business-litigatio

n/multidistrict-litigation-dominating-federal-docket [https://perma.cc/9JRV-BR58].

28 U.S.C. § 1407; Wittenberg, supra note 73; Dana Shilling & Christine Vincent,

Lawyer’s Desk Book § 20.10 (2d ed. Supp. I 2023).

2023] Silencing Litigation Through Bankruptcy 1277

determines that doing so promotes justice and the convenience of the

parties and witnesses.

Once consolidated, the transferee judge handles all pre-trial motions.

These include those related to discovery, to certifying a class, to lack of

jurisdiction, to changing venue, and, importantly, to summary

judgment.

At the end of pre-trial proceedings, the cases are all sent back

to their individual district courts, and the cases then proceed to trial or

settlement.

MDL cases range widely, and MDL has become a popular device in

dealing with civil disputes in federal courts. MDL has been used in cases

regarding product liability, consumer protection law violations,

employment discrimination, patent infringement, and securities law

violations.

A study of federal litigation between 1968 and 2021 found

that at the end of the period, seventy percent of all pending federal civil

cases were MDLs.

But MDL is not without its flaws. Although the statute authorizing

MDL stipulates that once pre-trial proceedings have concluded, cases are

remanded to the district court in which they were filed,

this is seldom

the actual result. Instead, nearly all transferred cases are caught in “a

captive settlement negotiation,” resolved either by a dispositive motion or

settlement.

Because the settlement takes place during this pre-trial

period, claims are not adjudicated, which means that meritless claims may

28 U.S.C. § 1651. The transfer can occur through the panel’s own motion. Shilling &

Vincent, supra note 74, § 20.10.

Trudy Y. Hartzog & Wade H. Logan III, The Nuts and Bolts of Multidistrict Litigation,

S.C. Law., Jul.–Aug. 1996, at 20, 23.

Id.

See Wittenberg, supra note 73 (“[T]he top three MDL case types are products liability,

antitrust, and sales practices.”); Memorandum of Points and Authorities in Support of Vercy,

L.L.C.’s Motion to Transfer and Consolidate for Pretrial Proceedings at 3, In re Vercy, L.L.C.

Tel. Consumer Prot. Act Litig., No. 3049 (J.P.M.L. Aug. 8, 2022) (consumer protection); The

Mechanics of Multidistrict Litigation: Streamlining Complex Cases, Jones Day (Mar. 2023),

https://www.jonesday.com/en/insights/2023/03/the-mechanics-of-multidistrict-litigation-stre

amlining-complex-cases [https://perma.cc/54S2-WQMK] (describing employment

discrimination, antitrust, and intellectual property MDL cases).

MDL Cases as Percentage of Federal Civil Caseload, Laws. for Civ. Just.,

https://www.rules4mdls.com/_files/ugd/6c49d6_3014148f902a47bdac63d404cb3ab40c.pdf

[https://perma.cc/3F7M-QGSY]; U.S. Jud. Panel on Multidistrict Litig., Statistical Analysis

of Multidistrict Litigation Under 28 U.S.C. § 1407 (2018), https://www.jpml.uscourts.gov/

sites/jpml/files/JPML_Statistical_Analysis_of_Multidistrict_Litigation-FY-2018.pdf

[https://perma.cc/QG7G-2WZL].

Parikh, The New Mass Torts Bargain, supra note 24, at 474.

Id. at 476–77.

1278 Virginia Law Review [Vol. 109:1261

consume resources that otherwise would be allocated to actual

survivors.

In the aggregate, this drives up the defendant’s liability

without establishing their actual culpability.

Even worse, “claims of

future victims . . . cannot be aggregated as part of the settlement,” leaving

defendants exposed to potentially high-value claims that may be brought

in the future.

The process also weighs heavily on plaintiffs, who may be

trapped in the proceedings for years without ever getting to trial.

Against this backdrop, scholars have argued that MDL violates the

principles under which people and organizations are to be held

accountable with its many unorthodox procedures that allow repeat

players, like lawyers, to enrich themselves to the detriment of the parties

they represent.

Scholars also note that the ad hoc and unstructured

nature of the proceedings have the practical effect of forcing defendants

into inequitable settlements, sometimes based on relatively meritless

claims.

In light of the collective flaws and critiques of coordination and

consolidation mechanisms, corporations have turned to chapter 11

bankruptcy.

The next Part explains how.

See id. at 477.

See id.

Id.

See David L. Noll, MDL as Public Administration, 118 Mich. L. Rev. 403, 408 (2019)

(critiquing MDLs as lacking “the guarantees of transparency, public participation, and ex post

review”); Elizabeth Chamblee Burch, Monopolies in Multidistrict Litigation, 70 Vand. L. Rev.

67, 72–74 (2017) (arguing that “the lack of checks and balances to thwart self-dealing

temptations [in MDLs] becomes all the more startling and suggests that regulation is

warranted” because MDL proceedings are rarely returned to the original districts).

See Noll, supra note 85, at 406 (“As MDL has grown in importance, critics have charged

that its procedural flexibility violates the rule of law.”).

Scholars have criticized MDLs for silencing people and for falling short of providing

procedural justice. See Abbe R. Gluck & Elizabeth Chamblee Burch, MDL Revolution, 96

N.Y.U. L. Rev. 1, 7–8 (2021) (discussing the benefits and drawbacks of MDLs); supra note

85. This Article does not seek to compare bankruptcy with MDLs, class actions, and individual

tort lawsuits. Their flaws should not be addressed by funneling plaintiffs to bankruptcy courts

and into a procedure not designed to primarily deal with tort claims or adjudicate lawsuits,

bolstered by an argument (accurate or not) that bankruptcy provides less worse silencing,

procedural justice, or due process. See infra Part II.

2023] Silencing Litigation Through Bankruptcy 1279

II. ONSLAUGHT LITIGATION INSIDE BANKRUPTCY

Chapter 11 was not designed for businesses dealing with onslaught

litigation, particularly mass tort litigation.

Its creators devised a system

to facilitate the restructuring of a company and its debts, thus hopefully

preserving enterprises.

Along with the preservation of businesses, the

business bankruptcy system aims to maximize the economic value of the

enterprise, and, as discussed when the Bankruptcy Code (“Code”) was

enacted in 1978, possibly to save jobs and communities.

Accordingly,

as detailed by Melissa Jacoby, the business bankruptcy system should be

understood as a public-private partnership.

As evident in this description, the drafters of the Code contemplated

that most parties involved in a bankruptcy case would have knowingly

entered a relationship with the debtor, usually contractually, whether

those parties be lenders, suppliers, or employees.

Only occasionally

would parties who did not seek to have a legal relationship with the

debtor—such as tort victims—be dragged into the bankruptcy

proceeding, and in these instances, the bankruptcy case would only

See Alan N. Resnick, Bankruptcy as a Vehicle for Resolving Enterprise-Threatening

Mass Tort Liability, 148 U. Pa. L. Rev. 2045, 2046 (2000) (“When the Bankruptcy Code was

enacted in 1978, Congress did not contemplate the unique problems caused by mass tort

liability involving future, as well as present, claimants, or that companies facing such massive

liability would seek relief under the bankruptcy laws.”).

See, e.g., Jacoby, Shocking Business Bankruptcy Law, supra note 24, at 412 (noting that

chapter 11 is “[m]eant to facilitate the reorganization and preservation of for-profit and

nonprofit enterprises”); Simon, Bankruptcy Grifters, supra note 24, at 1162 (“Chapter 11 is a

forum focused on reorganizing struggling businesses that are often encumbered by

unmanageable debt.”); Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 37

n.2 (2008) (“[T]he central purpose of Chapter 11 is to facilitate reorganizations . . . .”).

Melissa B. Jacoby, Unbundling Business Bankruptcy Law, 101 N.C. L. Rev. 1703, 1710–

11 (2023) [hereinafter Jacoby, Unbundling Business Bankruptcy Law]; see also Elizabeth

Warren, Bankruptcy Policy, 54 U. Chi. L. Rev. 775, 788 (1987) (“Congressional comments

on the Bankruptcy Code are liberally sprinkled with discussions of policies to ‘protect the

investing public, protect jobs, and help save troubled businesses,’ of concern about the

community impact of bankruptcy, and of ‘the public interest’ beyond the interests of the

disputing parties.”).

Melissa B. Jacoby, Corporate Bankruptcy Hybridity, 166 U. Pa. L. Rev. 1715, 1719−21

(2018) [hereinafter Jacoby, Corporate Bankruptcy Hybridity]; Jacoby, Shocking Business

Bankruptcy Law, supra note 24, at 412.

This reality is the basis for the creditor’s bargain theory that has pervaded debates about

business bankruptcy law. See Anthony J. Casey, Chapter 11’s Renegotiation Framework and

the Purpose of Corporate Bankruptcy, 120 Colum. L. Rev. 1709, 1712 (2020) (discussing the

creditor’s bargain theory); Anthony J. Casey, The Creditors’ Bargain and Option-Preservation

Priority in Chapter 11, 78 U. Chi. L. Rev. 759, 807 (2011) (disputing the “optimal distribution

rule” that is the basis of the creditor’s bargain theory).

1280 Virginia Law Review [Vol. 109:1261

tangentially be about them and their claims. The attraction for

corporations dealing with onslaught litigation stems from the exact

opposite of how the bankruptcy system presumes they will use

reorganization. These corporations file bankruptcy primarily (or solely)

to address debts that arise from nonconsensual transactions, such as

claims for environmental harm, product liability, and sexual assault and

harassment.

A. Chapter 11 Reorganization Basics, Onslaught Litigation Edition

Chapter 11 provides a legal framework for the debtor business and its

creditors, with the input of other system actors—creditors’ committees,

appointed trustees and examiners, and the Office of the United States

Trustee—to craft a restructuring deal that will address all claims against

the debtor, those arising from consensual and nonconsensual

transactions.

The rest of the Code includes provisions that impose order

on creditors and facilitate the debtor’s path to an approved deal. The Code

also has an equity provision that allows the bankruptcy court to “issue any

order, process, or judgment that is necessary or appropriate to carry out

the provisions of” the Code.

Foremost among Code provisions that are

important to corporations dealing with onslaught litigation are the

automatic stay, the requirement that creditors file claims, the ability of a

majority of creditors to bind all creditors to a restructuring deal, and the

permanent injunction against collecting debts from the debtor at the

conclusion of its bankruptcy case.

The moment a business files a chapter 11 petition, the automatic stay

activates, freezing nearly all lawsuits and actions against the debtor.

The

automatic stay provides the debtor business with the “breathing room”

necessary to craft and implement a reorganization plan.

In the context

of onslaught litigation, this means that all pending lawsuits not involving

Jacoby, supra note 91, at 1723–24.

See, e.g., Jacoby, Shocking Business Bankruptcy Law, supra note 24, at 421 (discussing

the Purdue Pharma bankruptcy proceedings). See infra notes 112–16 and accompanying text

for details about these system actors.

11 U.S.C. § 105(a).

Id. § 362.

In re HSM Kennewick, L.P., 347 B.R. 569, 571 (Bankr. N.D. Tex. 2006).

2023] Silencing Litigation Through Bankruptcy 1281

the state come to a grinding halt and that all contemplated lawsuits cannot

be initiated.

The automatic stay, in part, is designed to allow the collection of all the

claims against the debtor. The filing of a chapter 11 petition also starts the

clock running for creditors to file claims against the debtor arising from

the business’s pre-bankruptcy actions.

The court sets the “bar date”—

the date by which all creditors must file their proofs of claim.

100

If a

creditor does not file a claim by the bar date, and the debtor does not list

its claim in its schedules as disputed, contingent, or unliquidated,

101

the

creditor effectively asserts to the court that it does not have a claim against

the debtor, waiving its claim forevermore. The bar date enables the

compilation of the universe of claims that the bankruptcy will resolve,

thus providing finality regarding claims that can be brought related to

alleged pre-bankruptcy harms.

102

The Code defines “claim” very broadly as encompassing any “right to

payment, whether or not such right is reduced to judgment, liquidated,

unliquidated, fixed, contingent, matured, unmatured, disputed,

undisputed, legal, equitable, secured, or unsecured.”

103

All people who

may have been injured by the business must make a claim. This includes

those people who already have filed lawsuits against the business, those

people who know they were injured but have not yet initiated a lawsuit,

and those people who may not know they were injured because of the

debtor’s pre-bankruptcy actions. People who have latent claims from

injuries that have yet to manifest are termed “future claimants” and hold

“future claims.”

104

If someone who was allegedly harmed by the business

An exception to the automatic stay allows actions involving state and federal governments

to continue. 11 U.S.C. § 362(b)(4).

Id. § 501. Because there is a gap in time between when a business files chapter 11 and

when the business emerges from chapter 11, claimants also may file post-petition, but pre-

confirmation claims, which are treated as administrative expense claims. Id. § 507; Wright v.

Owens Corning, 679 F.3d 101, 107 (3d Cir. 2012) (discussing post-petition claims).

100

Fed. R. Bankr. P. 3003 (allowing for a court to set a deadline for filing); Fed. R. Bankr.

P. 3007 (utilizing the term “bar date” in the comments).

101

In chapter 11, the debtor is required to file a schedule of assets and liabilities. Fed. R.

Bankr. P. 1007. If a creditor’s claim is listed among the liabilities and is not designated as

disputed, unliquidated, or contingent, the court will consider the creditor to have a claim in

the amount and of the type listed by the debtor. 11 U.S.C. § 1111(a).

102

See Smith, supra note 11, at 1640–41 (discussing the claims process).

103

11 U.S.C. § 101(5)(A).

104

See Simon, Bankruptcy Grifters, supra note 24, at 1165 (discussing latent claims).

1282 Virginia Law Review [Vol. 109:1261

is not listed as a claimant, in the future they are prohibited from filing a

lawsuit based on those harms.

Once a proof of claim is filed, based on evidence submitted by the

claimant and the debtor, the court determines the claim’s validity.

105

The

court also has the power to estimate the aggregate liability for claims,

including future claims. Claims estimation does not take away a

claimant’s and the debtor’s right to litigate a single claim’s actual value.

Instead, it serves to establish a baseline value of all claims, taken

collectively, which the debtor and creditors can refer to in negotiations,

when crafting a reorganization plan, and when establishing trusts to pay

claimants.

106

The core of a chapter 11 proceeding is how the business restructures its

operations and debts. Debtors typically negotiate a reorganization plan

that allows the business to continue operating or sell the business as a

going concern.

107

This plan must garner sufficient support from creditors:

two-thirds in dollar amount of claims and more than one-half in number

of the creditors whose rights are impaired must vote for the plan.

108

Dissenting creditors can be bound to the plan, which can incorporate

settlements among the debtor and creditors, such as insurance companies

and groups of victims, as approved by the bankruptcy court.

109

Settlements and a confirmed plan mark the end of a chapter 11

proceeding. The Code ensures the finality of the resolution of claims, as

contemplated by those settlements and the plan. The court enters a

discharge along with an injunction that prohibits parties from attempting

to collect from the business on any claim asserted or which could have

105

11 U.S.C. § 502; see also Smith, supra note 11, at 1640–41 (describing the process of

creditor claims filing within the bankruptcy).

106

See Smith, supra note 11, at 1647–48 (discussing claims estimation).

107

See Jacoby, Shocking Business Bankruptcy Law, supra note 24, at 415 (detailing these

two outcomes). Debtors also may sell the business as a going concern through a sale of

substantially all assets. 11 U.S.C. § 363.

The term “going concern” refers to “an existing solvent business, which is being

conducted in the usual and ordinary way for which it was organized.” “Going concern

value” means “[t]he value of a firm, assuming that the firm’s organization and assets

remain intact and are used to generate future income and cash flows.”

M Life Ins. v. Sapers & Wallack Ins. Agency, 40 P.3d 6, 12 (Colo. App. 2001), overruled on

other grounds by Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003) (quoting

Black’s Law Dictionary 691 (6th ed. 1990)). For a discussion of the use of sales of assets to

fund settlement trusts, see Parikh, Scarlet-Lettered Bankruptcy, supra note 24, at 430–34.

108

11 U.S.C. §§ 1126, 1129.

109

Id. § 1129.

2023] Silencing Litigation Through Bankruptcy 1283

been asserted against the debtor during the chapter 11 case.

110

All

creditors, regardless of whether they filed a claim or participated in the

case, are bound to the terms of the plan and have no ability to assert their

discharged claims.

111

Three fundamental features of the business bankruptcy system lie in

the background of these provisions designed to facilitate a restructuring.

First, the system contains layers of oversight. The United States Trustee,

an arm of the Department of Justice, evaluates the debtor’s compliance

with bankruptcy laws.

112

The Code provides for the appointment of an

official committee of unsecured creditors, which in mass tort cases often

is comprised primarily of tort claimants, and allows for the appointment

of other creditors’ committees, such as a committee solely made up of tort

claimants.

113

If the debtor business, which continues to control its

operations post-filing as the “debtor in possession,”

114

is not fulfilling its

duties to manage its affairs, the court may appoint a chapter 11 trustee, a

person who assumes management of the business.

115

Relatedly, the court

may appoint an examiner to investigate an aspect or multiple aspects of

the business’s pre-bankruptcy affairs.

116

Second, the Code includes disclosure provisions that require a debtor

to turn over significant information, particularly financial information.

117

Third, access to bankruptcy requires that the business have a good-faith

110

Id. §§ 524, 1141(a).

111

See Brubaker, Mandatory Aggregation of Mass Tort Litigation in Bankruptcy, supra note

24, at 997 (noting outcome); Edward J. Janger, Aggregation and Abuse: Mass Torts in

Bankruptcy, 91 Fordham L. Rev. 361, 368–73 (2022) (describing the reorganization process

in the context of mass torts).

112

See Lindsey D. Simon, The Guardian Trustee in Bankruptcy Courts and Beyond, 98 N.C.

L. Rev. 1297, 1304–14 (2020) (discussing the United States Trustee).

113

11 U.S.C. § 1102(a); see also Simon, Bankruptcy Grifters, supra note 24, at 1164 (noting

creditors’ committees).

114

11 U.S.C. § 1101(1).

115

Id. § 1104(a) (providing that the court shall order the appointment of a trustee for cause

upon a finding of “fraud, dishonesty, incompetence, or gross mismanagement,” or if “such

appointment is in the interests of creditors”).

116

Id. § 1104(c); see also Jonathan C. Lipson, Understanding Failure: Examiners and the

Bankruptcy Reorganization of Large Public Companies, 84 Am. Bankr. L.J. 1, 2–3, 12–14

(2010) (discussing the examiner’s role); Letter from Jonathan C. Lipson, Professor of Law,

Temple Univ., to William K. Harrington, U.S. Trustee (Region 2), at 1–10 (Nov. 5, 2019)

[hereinafter Lipson Letter], https://ssrn.com/abstract=3532642 [https://perma.cc/P29S-FX

WC] (urging the appointment of an examiner in In re Purdue Pharma, LP, No. 19-23649

(Bankr. S.D.N.Y. Sept. 16, 2019)).

117

See, e.g., 11 U.S.C. § 521(a) (providing for disclosures); id. § 1125 (requiring

information before voting on a plan); Fed. R. Bankr. P. 2004 (allowing examinations).

1284 Virginia Law Review [Vol. 109:1261

reason to file.

118

For instance, in 2021, the National Rifle Association

(“NRA”) spent four months in chapter 11 attempting and failing to prove

that despite being solvent and admitting to filing in order to escape the

New York State Attorney General’s action to dissolve it for alleged

corruption, the NRA still belonged in bankruptcy.

119

The U.S. Court of

Appeals for the Third Circuit recently dismissed J&J’s corporate entity’s

chapter 11 case for lacking good faith because it was not in apparent or

immediate financial distress.

120

B. The Perks of Using Chapter 11 for Onslaught Litigation

Although Congress did not contemplate reorganizations in the wake of

onslaught litigation, such as mass tort bankruptcies, the Code makes filing

chapter 11 attractive to companies dealing with a plethora of litigation,

leading to what Melissa Jacoby has termed “off-label bankruptcies” in

which “parties use the system to solve problems other than unpayable debt

loads (such as litigation management).”

121

Crucial to off-label

bankruptcies is the willingness of bankruptcy judges to cede to debtors’

demands for benefits (“perks”) that the Code does not directly

authorize.

122

As Peter Boyle notes, “in the face of mass-tort litigation”

some judges believe that “equity supersedes the strict requirements of the

Code.”

123

The equity provision makes modern day mass tort and

onslaught litigation bankruptcy possible.

The appeal of bankruptcy originates from the halting and collecting of

claims, which, in the context of litigation, brings an end to an otherwise

long tail of fresh lawsuits.

124

A perk of bankruptcy is that the judge may

extend the automatic stay which effectuates the halting of actions against

118

11 U.S.C. § 1112(b).

119

Jonathan Stempel, NRA Says Bankruptcy Shows Why NY Attorney General Cannot

Shut It Down, Reuters (July 21, 2021, 3:04 PM), https://www.reuters.com/legal/transac

tional/nra-says-bankruptcy-shows-why-ny-attorney-general-cannot-shut-it-down-2021-07-21

[https://perma.cc/39D9-JE84]; Tim Mak, Judge Dismisses NRA Bankruptcy Case,

Heightening Risk for Dissolution of Group, NPR (May 11, 2021 4:43 PM),

https://www.npr.org/2021/05/11/995934682/judge-dismisses-nra-bankruptcy-case-heighteni

ng-risk-for-dissolution-of-group [https://perma.cc/36JK-VJL9].

120

In re LTL Mgmt., LLC, 58 F.4th 738, 763 (3d Cir. 2023).

121

Jacoby, Shocking Business Bankruptcy Law, supra note 24, at 411.

122

Id.

123

Peter M. Boyle, Non-Debtor Liability in Chapter 11: Validity of Third-Party Discharge

in Bankruptcy, 61 Fordham L. Rev. 421, 431 (1992).

124

Resnick, supra note 88, at 2045 (discussing “long-tail” torts).

2023] Silencing Litigation Through Bankruptcy 1285

the debtor to non-debtor parties.

125

With all litigation stemming from the

alleged wrongful conduct halted, the natural complementary request is

that the claims against third parties, such as the debtor’s owners, be

brought into and resolved in the chapter 11 proceeding. This perk is

effectuated via two main mechanisms—channeling injunctions and third-

party releases—both of which require a bankruptcy court to call upon its

equity power.

Specifically, the debtor business and third parties want the chapter 11

case to resolve all claims arising from the alleged wrongful conduct,

including future claims. People who hold future claims, necessarily, do

not know that they need to file claims in the chapter 11 case. To solve this

problem, the bankruptcy court may appoint a future claims representative

to protect the interests of future claimants.

126

With all creditors

(ostensibly) represented, creditors, creditors’ committees, and the future

claims representative settle their claims by agreeing that claims will be

dealt with by a trust.

127

This trust is funded by the debtor business,

drawing on assets, future income, and settlements with insurers.

128

If the

trust resolves claims against third parties, these third parties will

contribute money to the trust.

129

Upon plan confirmation, the bankruptcy court issues a channeling

injunction that requires injured parties, including future claimants, to look

125

Simon, Bankruptcy Grifters, supra note 24, at 1163; Ralph Brubaker, Bankruptcy

Injunctions and Complex Litigation: A Critical Reappraisal of Non-Debtor Releases in

Chapter 11 Reorganizations, 1997 U. Ill. L. Rev. 959, 969 [hereinafter Brubaker, Bankruptcy

Injunctions and Complex Litigation] (“Congress specifically contemplated that bankruptcy

courts would issue section 105 injunctions ‘to stay actions not covered by the automatic stay,’

with the courts determining ‘on a case-by-case basis whether a particular action which may

be harming the estate should be stayed.’” (quoting S. Rep. No. 95-989, at 51 (1978))).

126

See Smith, supra note 11, at 1640 (discussing representation of future claims); Yair

Listokin & Kenneth Ayotte, Protecting Future Claimants in Mass Tort Bankruptcies, 98 Nw.

U. L. Rev. 1435, 1443–46 (2004) (overviewing the problems presented in adequately

providing for future claimants).

127

See Simon, Bankruptcy Grifters, supra note 24, at 1167 (“Typically, channeling

injunctions require all claimants, both current and future, to settle post-confirmation claims

against a specified trust.”); Brubaker, Mandatory Aggregation of Mass Tort Litigation in

Bankruptcy, supra note 24, at 999–1003 (discussing consolidation of claims under 28 U.S.C.

§ 157(b)); Smith, supra note 11, at 1649–63 (detailing how 28 U.S.C. § 157(b) and 28 U.S.C.

§ 1334(b) provide the bankruptcy court’s jurisdiction over a global resolution of mass tort

claims).

128

See Simon, Bankruptcy Grifters, supra note 24, at 1167–68 (discussing this trust).

129

See Brubaker, Bankruptcy Injunctions and Complex Litigation, supra note 125, at 971

(noting how creditors are persuaded to include third parties in the trust and plan).

1286 Virginia Law Review [Vol. 109:1261

to the trust and only the trust to resolve and pay their claims.

130

Channeling injunctions that include claims against non-debtor parties

necessarily require that, along with the debtor business, non-debtor

parties be released from liability—that is, third-party releases.

131

Bankruptcy courts situate the ability to approve channeling injunctions

in their equity power, combined with subsections 363(f) and 363(h),

which “explicitly provide for the channeling of claims in this manner.”

132

Courts (and some scholars) defend the use of the bankruptcy court’s

equity power by calling upon the guiding principles of traditional

reorganization cases, stating that the use of channeling injunctions and

third-party releases “will help to maximize the amounts which will be

available for ultimate payment.”

133

Likewise, bankruptcy courts find the authority to issue third-party

releases in their equity power. Section 524(e), which provides for the

discharge, restricts the discharge to the debtor’s personal liability,

preserving the ability of claimants to pursue non-debtors.

134

But that

section does not prevent judges from using equity to extend the discharge

to third parties.

135

Combined, a business and its third parties can pause all litigation, use

the Code’s provisions designed to induce creditors to negotiate to push

for settlements of all liability, and use the Code’s provisions regarding

plan confirmation to “cramdown” the plan over nonconsenting tort

victims.

136

Although the legality of channeling injunctions and third-party

releases historically drew intense suspicion,

137

both have become more

130

See Simon, Bankruptcy Grifters, supra note 24, at 1167–68 (discussing channeling

injunctions).

131

Id. at 1169.

132

In re Johns-Manville Corp., 68 B.R. 618, 625 (Bankr. S.D.N.Y. 1986).

133

In re Johns-Manville Corp., 97 B.R. 174, 178 (Bankr. S.D.N.Y. 1989); see also Simon,

Bankruptcy Grifters, supra note 24, at 1168–69 (presenting a hypothetical to detail this

reasoning); William Organek, “A Bitter Result”: Purdue Pharma, a Sackler Bankruptcy Filing,

and Improving Monetary and Nonmonetary Recoveries in Mass Tort Bankruptcies, 96 Am.

Bankr. L.J. 361, 364 (2022) (arguing that despite their flaws, third-party releases may increase

monetary and nonmonetary outcomes for creditors).

134

See Brubaker, Bankruptcy Injunctions and Complex Litigation, supra note 125, at 970

(discussing § 524(e)).

135

See Simon, Bankruptcy Grifters, supra note 24, at 1169–70 (discussing the statutory

basis and use of third-party releases); Brubaker, Bankruptcy Injunctions and Complex

Litigation, supra note 125, at 972.

136

See 11 U.S.C. §§ 1126, 1129.

137

See, e.g., Boyle, supra note 123, at 450 (“Discharges of non-debtors under section 105(a)

must cease. They are not only violative of the express command of section 524 but are also

2023] Silencing Litigation Through Bankruptcy 1287

accepted tools to address mass torts.

138

Thereby a system designed to

rehabilitate struggling businesses has turned into a system to litigate mass

torts and similar lawsuits by saddling survivors with settlements to which

they may not agree and from which they have little ability to escape. Even

more troubling than this non-contemplated use of bankruptcy is that

debtor businesses have become adept at convincing bankruptcy judges to

bypass the protections that sit as backdrops in all chapter 11 cases.

139

C. From Asbestos to IUDs and Breast Implants

The creep of acceptance of channeling injunctions and third-party

releases began with onslaught litigation involving asbestos. This litigation

culminated in an amendment to the Code to deal specifically with these

mass tort cases. Simultaneously, bankruptcy courts expanded the relief

provided in asbestos cases to other mass torts. This, in turn, led to the

creation of an on-ramp for bankruptcy to be used for onslaught litigation

writ large.

1. The Emergence of Bankruptcy as an Onslaught Litigation Tool

Hundreds of thousands of lawsuits involving the collection of minerals

known as asbestos—a substance that “confers remarkable properties of

flexibility, tensile strength, and resistance to acid or fire”

140

—served as

the impetus for bankruptcy to become a tool for resolving onslaught

contrary to public policy.”); G. Marcus Cole, A Calculus Without Consent: Mass Tort

Bankruptcies, Future Claimants, and the Problem of Third-Party Non-Debtor “Discharge,” 84

Iowa L. Rev. 753, 800 (1999) (“Where bankruptcy courts prohibit consensual releases

between third parties and creditors, or permit a third party non-debtor ‘discharge’ of future

claims, they are engaged in judicial overreaching unwarranted by the circumstances,

unauthorized by the Code, and destructive of the rule of law.”); Joshua M. Silverstein,

Overlooking Tort Claimants’ Best Interests: Non-Debtor Releases in Asbestos Bankruptcies,

78 UMKC L. Rev. 1, 100 (2009) (“The extraordinary circumstances in asbestos insolvencies

do not, however, justify disregarding fundamental protections set forth in the Bankruptcy

Code.”).

138

See Simon, Bankruptcy Grifters, supra note 24, at 1170–71 (overviewing the debates).

139

See Melissa B. Jacoby, Fake and Real People in Bankruptcy, 39 Emory Bankr. Devs. J.

(forthcoming 2023) (manuscript at 5) [hereinafter Jacoby, Fake and Real People in

Bankruptcy], https://ssrn.com/abstract=4228047 [https://perma.cc/LQA8-BY7E] (“In real

life, these integrity promoting elements tend to get muted in large business bankruptcy

cases.”); Janger, supra note 111, at 373 (“[C]reative attorneys have found ways to work around

this process.”).

140

Peter H. Schuck, The Worst Should Go First: Deferral Registries in Asbestos Litigation,

15 Harv. J.L. & Pub. Pol’y 541, 544 n.5 (1992).

1288 Virginia Law Review [Vol. 109:1261

litigation.

141

Asbestos’s many benefits led to its widespread use in the

construction of buildings, boilers, steam engines, pipes, cement, and

similar projects.

142

At the time, it was not known that asbestos exposure

can lead to severe negative health consequences, including cancer and

other fatal or seriously impairing illnesses.

143

The discovery of asbestos’s

toxicity launched thousands of lawsuits.

144

During the 1990s, lawsuits

grew “at the rate of approximately 40,000 per year.”

145

Because of the swell of claims, in the 1980s, major manufacturers of

asbestos materials filed bankruptcy, including the corporate giants Johns-

Manville and Raybestos. Johns-Manville’s chapter 11 case, filed in

1982,

146

is particularly instructive for how bankruptcy became the place

to address this particular instance of onslaught litigation. When it filed

chapter 11, Johns-Manville projected that an unknown, but likely

immense number of lawsuits would be filed against it in the future.

147

Crucially, these future lawsuits would be predicated on Johns-Manville’s

past actions. Bankruptcy cases are supposed to address all of a company’s

past actions, allowing the company to emerge without having to worry

about claims based on its pre-bankruptcy life.

The most important aspect of Johns-Manville’s chapter 11 case was

establishing if and how future tort claims could be addressed in the case.

When Johns-Manville filed, it was solvent, meaning its assets were worth

more than its liabilities.

148

Although the Code does not have an insolvency

prerequisite to filing, solvency is an indication of a bad-faith filing.

149

The

relevant question boiled down to whether there is a meaningful distinction

for purposes of access to bankruptcy between current claims and those

141

Smith, supra note 11, at 1615–18.

142

Schuck, supra note 140, at 544 n.5.

143

See id. at 544–49 (discussing the health conditions associated with asbestos).

144

Id. at 541 n.1; see also Smith, supra note 11, at 1618 (noting that 37,000 cases were filed

by 1985).

145

Smith, supra note 11, at 1618.

146

In re Johns-Manville Corp., No. 82-bk-11656 (Bankr. S.D.N.Y. filed Aug. 26, 1982).

147

In re Johns-Manville Corp., 36 B.R. 727, 729 (Bankr. S.D.N.Y. 1984) (“According to

Manville, this current problem of approximately 16,000 lawsuits pending as of the filing date

is compounded by the crushing economic burden to be suffered by Manville over the next 20–

30 years by the filing of an even more staggering number of suits by those who had been

exposed but who will not manifest the asbestos-related diseases until some time during this

future period (‘the future asbestos claimants’).”).

148

See Janger, supra note 111, at 376 (citing A.R. Gini, MANVILLE: The Ethics of

Economic Efficiency?, 3 J. Bus. Ethics 63, 68 (1984)) (discussing the relevance of Johns-

Manville’s seeming solvency).

149

See supra notes 118–20 and accompanying text.

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that would inevitably arise in the future.

150

The judge found the difference

to be minimal, that Johns-Manville likely would be unable to handle all

forthcoming asbestos-related claims while staying in business, and, thus,

that the filing was not in bad faith—a decision that would have far-

reaching effects.

151

Having found that a company could file bankruptcy to address not only

current claims, but also future, yet-to-be-known claims, the Johns-

Manville Corp. judge needed to provide for these future claimants. This

led to the birth of the future claims representative and the idea of creating

a trust to pay out future claims as claimants emerged.

In Johns-Manville, the trust was funded by payouts under various

insurance policies and by the company from its current cash, future

income, and shares of its common stock.

152

The total assets in the trust

were presumed to be sufficient to pay current claims and all future claims;

it did not matter when an individual claimant’s injury became apparent,

as the trust funds would be available whenever harmed parties came

forward.

153

In turn, the trust as a payout method facilitated the discharge

of the debts of future claimants at the time that Johns-Manville emerged

from chapter 11.

154

The reorganization plan channeled claims of present

or future asbestos victims against Johns-Manville and related third parties

to the trust, exclusively, with no other source of recourse.

155

In reality, the number of claims was much greater than the fund could

accommodate.

156

Current claims were paid in full, causing the funds to

dwindle quickly.

157

Ultimately, future parties seeking redress against

Johns-Manville only received ten percent of their claims.

158

Johns-Manville’s chapter 11 case established five key elements of

modern-day mass tort bankruptcies: The ability to deal with future claims,

the appointment of a future claims representative, the creation of a trust,

the channeling of claims to that trust, and the extension of the discharge

150

In re Johns-Manville Corp., 68 B.R. 618, 628 (Bankr. S.D.N.Y. 1986).

151

Id. at 628, 632, 637.

152

Listokin & Ayotte, supra note 126, at 1444–45; see also In re Johns-Manville Corp., 68

B.R. at 621.

153

Listokin & Ayotte, supra note 126, at 1444–45.

154

Id. at 1144, 1145 n.47.

155

Id. at 1144–45.

156

Id. at 1445.

157

Id. (citing History, Manville Pers. Injury Settlement Tr., https://mantrust.claimsres.com/

history/ [https://perma.cc/H53R-QDWV] (last visited Apr. 26, 2023)).

158

Id.

1290 Virginia Law Review [Vol. 109:1261

to third parties whose actions were linked with claims channeled to the

trust. Of these, the channeling injunction and third-party release have

become the most important and the most stretched from their original

purpose. In Johns-Manville, its affiliated corporate entities, directors,

officers, employees, and insurers were granted releases. Insurers

contributed money to the trust, as they would have paid money to Johns-

Manville to be paid to claimants. Affiliated entities and a host of

employees were all part of the Johns-Manville company. The third-party

releases were effectively confined to the business and its insurance

companies.

After confirmation of Johns-Manville’s plan, other asbestos companies

filed chapter 11 with the intent to follow the Johns-Manville blueprint.

159

But questions remained about the legality of how Johns-Manville had

dealt with future claims and claimants. To provide certainty, in 1994,

Congress put the Johns-Manville solution into the Code, adding section

524(g), which codifies the procedures for obtaining a channeling

injunction in asbestos cases.

160

Although section 524(g) only applies to

asbestos cases, and only specifically allows for non-debtor releases for

insurance companies, in the legislative history, Congress stated that the

section draws on the equitable powers bankruptcy courts already

possessed.

161

As such, the ability to use the Code’s equity provision to

create similar trusts with channeling injunctions and third-party releases

in other mass tort bankruptcy cases, and in onslaught litigation cases more

broadly, remained open.

2. Honing the Bankruptcy Tool

The opportunity to once again deploy the Johns-Manville-style

equitable maneuver in bankruptcy presented itself soon enough.

Throughout the mid-1960s, gynecologist Hugh Davis developed and

tested various IUDs, eventually creating the Dalkon Shield in 1968.

162

Davis’s design was intended to address design flaws present in other IUDs

159

See infra Subsection II.C.2.

160

11 U.S.C. § 524(g); see also Sander L. Esserman & David J. Parsons, The Case for Broad

Access to 11 U.S.C. § 524(g) in Light of the Third Circuit’s Ongoing Business Requirement

Dicta in Combustion Engineering, 62 N.Y.U. Ann. Surv. Am. L. 187, 189–92 (2006)

(detailing the origin of § 524(g)).

161

See Susan Power Johnston & Katherine Porter, Extension of Section 524(g) of the

Bankruptcy Code to Nondebtor Parents, Affiliates, and Transaction Parties, 59 Bus. Law. 503,

514–15 (2004) (detailing legislative history).

162

Richard B. Sobol, Bending the Law 1 (1991).

2023] Silencing Litigation Through Bankruptcy 1291

that frequently resulted in the IUD being expelled from the body.

163

But

Davis’s design choices would prove to be even more problematic. The

Dalkon Shield was painful to insert and remove, increased the risk of

complications of pregnancy while it was inserted, and invited bacteria and

subsequent infection into the uterine cavity as long as it remained in the

body.

164

Davis sold the rights to the Dalkon Shield to the A.H. Robins

Company, which began aggressively marketing the product.

165

By the end

of 1973, more than three million Dalkon Shields had been sold.

166

Along

the way, Robins turned a blind eye to evidence of high pregnancy rates

and information indicating the dangers of the device.

167

Months after

these reports, Robins further promoted the product and encouraged

pregnant individuals to keep the shield in place.

168

This went on for

several years, until Robins could no longer overcome the negative

publicity.

169

Robins withdrew the Dalkon Shield from the domestic

market in mid-1974, although the company continued to defend it as “a

safe and effective IUD.”

170

By 1984, over ten thousand claims had been filed against Robins.

171

Plaintiffs were awarded millions of dollars in damages, causing Robins to

become concerned about the increasing punitive damage awards, which

were not covered under its liability insurance policies.

172

Class

certification under Federal Rule of Civil Procedure 23(b)(1) on the issue

of punitive damages failed, and claims continued to amass.

173

163

Id.

164

Id. at 2, 9.

165

Id. at 4–6; Georgene Vairo, Mass Tort Bankruptcies: The Who, the Why and the How,

78 Am. Bankr. L.J. 93, 111–12 (2004) (overviewing the pre-bankruptcy procedural history of

Robins).

166

Sobol, supra note 162, at 7; Vairo, supra note 165, at 111.

167

Sobol, supra note 162, at 8–9 (detailing reports that Robins received about the dangers).

168

The promotion claimed that “[w]hen pregnancy does occur, the bag of water pushes the

IUD to one side and the developing baby is not really touching the device at all.” Id. at 9

(internal quotation marks omitted).

169

See id.

170

Id. at 9–11. Although Robins withdrew the Dalkon Shield from domestic market in 1974,

he continued to sell it abroad for another ten months. Id. at 10.

171

Id. at 23.

172

Id. at 37.

173

Id. at 45–47; Vairo, supra note 165, at 111.

1292 Virginia Law Review [Vol. 109:1261

In 1985, A.H. Robins filed chapter 11,

174

presumably with the intent to

use the Code’s provisions similarly to how Johns-Manville had

reorganized. The most notable development in the case was that several

plaintiffs’ attorneys attempted to separate the claims that listed the

company’s officers and directors and Robins’s liability insurer as

Robins’s co-defendants and then proceed with litigation outside of the

bankruptcy against every party but Robins.

175

Although directors,

officers, and insurance companies were implicated in Johns-Manville’s

chapter 11 case, their role in resolving claims took a back seat to questions

about future claims and claimants. In contrast, Robins’s litigation of the

legality of the court’s granting an injunction to stop claims against the co-

defendants from moving forward took center stage.

176

Robins argued that

claims against these third parties were actually claims against Robins’s

assets (such as the remaining liability insurance). Accepting this

reasoning, the court granted an injunction permanently barring related

claims against Robins’s co-defendants, “represent[ing] a significant

innovation in bankruptcy law that usually confines the automatic stay to

the debtor alone.”

177

The remainder of the A.H. Robins Co. v. Piccinin case proceeded akin

to the Johns-Manville case, but with an eye toward crafting a trust payout

procedure that would not drain that trust before all claims had been

paid.

178

With claimants’ liability estimated to be nearly $2.5 billion, the

reorganization plan established the Dalkon Shield Claimants Trust.

179

Claimants were given three payment options, two of which aimed at the

quick resolution of low value claims and claims facing alternative

causation issues.

180

Those people who had suffered the most serious

Dalkon Shield related injuries were offered settlements “designed to be

174

Sobol, supra note 162, at 47; Vairo, supra note 165, at 112; see In re AH Robins Co., 219

B.R. 145 (Bankr. E.D. Va. 1998) (discussing the initial filing and the subsequent submission

of the plan for reorganization).

175

Sobol, supra note 162, at 63.

176

See Vairo, supra note 165, at 115–16.

177

Id. at 113; see A.H. Robins Co. v. Piccinin, 788 F.2d 994, 997 (4th Cir. 1986) (discussing

the injunctions by the district court).

178

Vairo, supra note 165, at 94, 104, 114. A couple notable developments in the Robins case

were (1) that, immediately upon its filing, the district court withdrew the reference to the

bankruptcy court and most proceedings were conducted jointly by the district and bankruptcy

courts, and (2) that an examiner was appointed, who monitored Robins’s business affairs. In

re AH Robins Co., 88 B.R. 742, 743, 746 (E.D. Va. 1988).

179

Vairo, supra note 165, at 115.

180

Id. at 118–20.

2023] Silencing Litigation Through Bankruptcy 1293

as high as possible considering the medical evidence submitted, historical

settlement values and the existence of the limited fund, rather than an

initial low ball offer.”

181

If claimants did not accept this “best and final

offer,” they could proceed to trial or arbitration with their claims.

182

The Dalkon Shield Claimants Trust resolved over 300,000 claims,

nearly all of which ended without litigation or arbitration.

183

In 2000, ten

years after the trust’s creation, all claims had been paid and the trust was

closed.

184

The Robins chapter 11 case’s success lay in pushing claimants

to settle via flexible and multiple options for payment.

185

Whereas Johns-

Manville established how to wrap future claims and claimants into a

chapter 11 case, Robins established how to offer a seemingly beneficial

settlement to mass tort victims.

In addition, although questions about third-party releases arose in the

Robins case, as with the Johns-Manville case, the parties that asked to

attach themselves to Robins’s chapter 11 proceeding were so closely

related to the company that payout on claims against them were

intertwined with Robins’s payout on claims. Directors and officers

insurance policies would cover the directors and officers, and insurance

policies would cover the insurance carriers.

186

Following in the footsteps of Robins, while the Dalkon Shield

Claimants Trust was still distributing funds, in 1995, Dow Corning

Corporation filed chapter 11 to consolidate and address an onslaught of

lawsuits claiming injury from its defective silicone breast implants.

187

According to the lawsuits and various testimony, the silicone implant

caused autoimmune disorders, such as lupus, scleroderma, and

rheumatoid arthritis.

188

The FDA ordered Dow Corning to take the

product off the market in 1992.

189

By this time, it was estimated that up

181

Id. at 119.

182

Id. at 119–20.

183

Id. at 121.

184

Id.

185

Smith, supra note 11, at 1637. But see Listokin & Ayotte, supra note 126, at 1447 (noting

that the Robins trust proved not to be underfunded, but that the outcome still “penalized future

claimants in some respects”).

186

Robins and Johns-Manville focused on the ability to use third-party releases and to

establish trusts, and on providing survivors with full (or near-full) payment. Even with full

payment, concerns about silencing and procedural justice remain. These concerns were not

raised squarely during these cases, likely because they were early mass tort chapter 11 cases.

187

In re Dow Corning Corp., 211 B.R. 545, 553 (Bankr. E.D. Mich. 1997).

188

Id. at 551.

189

Id.

1294 Virginia Law Review [Vol. 109:1261

to two million individuals in the United States had the implants.

190

Nearly

20,000 lawsuits were filed against the company, causing it to incur $200

million in litigation costs.

191

Initially the lawsuits were consolidated via MDL in the Northern

District of Alabama,

192

which resulted in a global settlement of $2

billion.

193

But the terms of the settlement allowed claimants to opt-out if

the global settlement amount proved insufficient.

194

Within a year of its

approval, the global settlement fell far short.

195

In the face of hundreds of

pending actions, Dow Corning could not handle the defense of what it

anticipated to soon be thousands of additional lawsuits—an onslaught.

196

In Dow Corning’s case, third-party releases and claims settlement were

central to the litigation. The approved reorganization plan released Dow

Corning, its insurers, and shareholders from liability on tort claims. All

victims had to look to a claims-settlement process whereby they could

recover solely from a $3.2 billion trust.

197

Taken together, Robins and In

re Dow Corning established that resolving future claims and using

channeling injunctions and third-party releases were appropriate

exercises of bankruptcy courts’ equitable powers in non-asbestos

situations.

198

3. Charging Forward Despite Calls for Caution

When Congress enacted section 524(g) to clarify bankruptcy’s use in

asbestos cases, it also created the National Bankruptcy Review

Commission (“NBRC”), which was tasked with evaluating the

bankruptcy system.

199

In proposing that the bankruptcy system could be

an effective forum to handle aggregate litigation, the NBRC’s report,

published in 1997, called for legislation to address such litigation, and

identified concerns about due process and representation, particularly for

190

Id. at 552 n.5.

191

Id. at 551–52.

192

In re Silicone Gel Breast Implants Prods. Liab. Litig., 793 F. Supp. 1098, 1099–100

(J.P.M.L. 1992).

193

In re Dow Corning, 211 B.R. at 552.

194

Id.

195

Id.

196

Id. at 552–53.

197

See Vairo, supra note 165, at 125.

198

See id. at 110–11 (predicting increased usage of chapter 11 for non-asbestos litigation).

199

Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 1 & n.1).

2023] Silencing Litigation Through Bankruptcy 1295

future claimants, about claim estimation, and about venue.

200

Around the

same time, judges and academics advocated proceeding with caution in

using bankruptcy to resolve mass tort cases, focusing on due process and

fairness in treatment of tort claimants.

201

Despite these warnings, Congress took no action to address potential

issues with defendants using chapter 11 to resolve mass tort and other

aggregate litigation. Instead, in the years following the Dow Corning case,

several companies facing mass tort claims relied on chapter 11 to deal

with isolated problems, and, in doing so, pushed bankruptcy law’s

boundaries.

202

In 2004, Delaco filed chapter 11 after allegations that its

“Dexatrim” brand diet pills, which contained phenylpropanolamine,

caused strokes, heart conditions, and death.

203

Its plan resolved claims

arising from Dexatrim against the debtor company and non-debtor drug

vendors, distributors, and insurers.

204

The inclusion of drug vendors and

distributors among the third parties released from liability marked a

deviation from the prior three cases.

200

Id. (manuscript at 5–8) (discussing the Commission’s recommendations); Nat’l Bankr.

Rev. Comm’n, Bankruptcy: The Next Twenty Years 9–11 (1997), https://govinfo.library.unt.

edu/nbrc/reporttitlepg.html [https://perma.cc/BF82-USRW].

201

See Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 3, 8–11) (discussing

this scholarship); S. Elizabeth Gibson, A Response to Professor Resnick: Will this Vehicle

Pass Inspection?, 148 U. Pa. L. Rev. 2095, 2107–16 (2000) [hereinafter Gibson, A Response

to Professor Resnick] (drawing out constitutionality concerns with mass tort bankruptcy,

particularly with creation of classes); Edith H. Jones, Rough Justice in Mass Future Claims:

Should Bankruptcy Courts Direct Tort Reform?, 76 Tex. L. Rev. 1695, 1696 (1998) (urging

“caution before bankruptcy courts enter deeper into the mass tort litigation fray” and noting

“essential questions regarding class membership and adequacy of representation”); S.

Elizabeth Gibson, Judicial Management of Mass Tort Bankruptcy Cases 2 (2005),

https://www.uscourts.gov/sites/default/files/gibsjudi_1.pdf [https://perma.cc/VF5A-A93D]

(explaining the work as “a combination judicial manual–treatise–case study”); S. Elizabeth

Gibson, Case Studies of Mass Tort Limited Fund Class Action Settlements & Bankruptcy

Reorganizations 1 (2000) [hereinafter Gibson, Case Studies], https://www.uscourts.gov/sites/

default/files/masstort_1.pdf [https://perma.cc/ZU7Y-8MF4] (examining the fairness and

effectiveness of three class action mass tort settlements and four reorganizations to deal with

mass tort litigation).

202

See Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 12) (noting the

development of today’s aggregate litigation bankruptcy practices).

203

Voluntary Petition, In re Delaco Co., No. 04-bk-10899 (Bankr. S.D.N.Y. filed Feb. 12,

2004); Bloomberg News, Company News; Delaco Has Filed for Bankruptcy Protection, N.Y.

Times (Feb. 14, 2004), https://www.nytimes.com/2004/02/14/business/company-news-

delaco-has-filed-for-bankruptcy-protection.html [https://perma.cc/U9AV-B6MA]; Simon,

Bankruptcy Grifters, supra note 24, at 1175.

204

See Simon, Bankruptcy Grifters, supra note 24, at 1175 (discussing the Delaco

bankruptcy).

1296 Virginia Law Review [Vol. 109:1261

In 2017, the airbag manufacturer Takata used the same strategy when

faced with “near-endless tort liability” arising from its defective product

that was known “to overinflate and explode with such force that shrapnel

could spew into drivers and passengers.”

205

It filed chapter 11 with the

plan to sell all of its assets (without the attendant liabilities) to another

company, which the bankruptcy court allowed.

206

To deal with product

liability claims, it established a trust, channeled claims to that trust, and

provided a release from liability for itself and certain non-debtor

parties.

207

The Takata case allowed an otherwise solvent company to

resolve its onslaught liabilities through bankruptcy and severely limit how

injured parties could seek redress.

The next Part delves into a few modern-day chapter 11 cases as

examples of how for-profit and nonprofit organizations—and their

owners—have built off of these mass tort bankruptcies described in Part

II to leverage bankruptcy law and the reorganization process to silence

people who claim to have been harmed, bypass procedural justice, and

cabin what the public learns about alleged wrongdoing in the context of

the range of onslaught litigation.

III. C

ASE STUDIES IN SILENCING OF ONSLAUGHT LITIGATION

In crucial ways, the Catholic Church pioneered the recent wave of

chapter 11 filings to deal with onslaught litigation. Its series of filings

moved the use of chapter 11 from product liability that threatened a

company’s financial viability to its current use to escape from sexual

abuse and harassment claims, then to evade litigation about widespread

wrongdoing, and, most recently, to get ahead of litigation regarding not

only product liability, but a host of tortious conduct. The following three

case studies build the recent evolution of mass tort bankruptcy, with each

case study highlighting how for-profit and nonprofit organizations

leverage dealing with future claims, using channeling injunctions, and

asking for third-party releases to cabin people’s voices and cut short

public scrutiny of alleged wrongdoing.

205

See id. at 1177 (discussing the Takata bankruptcy).

206

Id.

207

Id. at 1177–78.

2023] Silencing Litigation Through Bankruptcy 1297

A. Sexual Abuse and Harassment: Catholic Dioceses

The Archdiocese of Portland, Oregon’s chapter 11 filing in July 2004

marked the first Catholic diocese bankruptcy filing.

208

But it was not the

first time that the Catholic Church had considered using bankruptcy to

consolidate, coordinate, and minimize litigation stemming from its

decades-long covering up of rampant sexual abuse of children by priests

across the United States. The Boston Globe’s groundbreaking reporting

in 2002 of the Archdiocese of Boston’s failure to protect children blew

open the doors on the Catholic Church’s wrongdoings.

209

The Boston

Archdiocese contemplated filing chapter 11 in the wake of the exposé and

as molestation-related claims mounted,

210

but it forwent bankruptcy in

favor of dealing with and settling lawsuits individually. As of 2021, it still

was entering into settlements in lawsuits that continued to trickle in

almost twenty years after the Globe story broke.

211

That abuse claims from conduct that occurred decades ago continue to

haunt the Boston Archdiocese demonstrates the attraction of filing

chapter 11 for other dioceses facing dozens or hundreds of abuse claims:

they can force all survivors to come forward immediately and minimize

208

Voluntary Petition, In re Roman Cath. Archbishop of Portland in Or., No. 04-37154

(Bankr. D. Or. July 6, 2004); Marie T. Reilly, Catholic Dioceses in Bankruptcy, 49 Seton Hall

L. Rev. 871, 873 (2019); Jonathan C. Lipson, When Churches Fail: The Diocesan Debtor

Dilemmas, 79 S. Cal. L. Rev. 363, 363–64 (2006) (discussing the first three diocese chapter

11 filings).

209

Michael Rezendes, Church Allowed Abuse by Priests for Years, Bos. Globe (Jan. 6,

2002), https://www.bostonglobe.com/news/special-reports/2002/01/06/church-allowed-abuse

-priest-for-years/cSHfGkTIrAT25qKGvBuDNM/story.html [https://perma.cc/K2UA-ET

DZ]; Reilly, supra note 208, at 872–73 (discussing the Archdiocese of Boston).

210

Pam Belluck & Adam Liptak, For Boston Archdiocese, Bankruptcy Would Have

Drawbacks, N.Y. Times (Dec. 3, 2002), https://www.nytimes.com/2002/12/03/us/for-boston-

archdiocese-bankruptcy-would-have-drawbacks.html [https://perma.cc/WE3P-HZJZ];

Walter V. Robinson & Stephen Kurkjian, Archdiocese Weighs Bankruptcy Filing, Bos. Globe

(Dec. 1, 2002), https://archive.boston.com/globe/spotlight/abuse/archive/print3/120102_bank

ruptcy.htm [https://perma.cc/8RTU-VXFD].

211

See Wheeler Cowperthwaite, Boston Archdiocese Settles Two New Lawsuits Alleging

Sexual Abuse by Priests, Patriot Ledger (Nov. 15, 2021, 12:18 PM), https://www.patriot

ledger.com/story/news/2021/11/15/boston-archdiocese-settles-two-lawsuits-filed-over-abusi

ve-priests-john-connell-brian-gallagher/6352051001/ [https://perma.cc/VA54-2M4U]

(reporting on the settlement of two lawsuits filed in November 2021); Jeremy C. Fox,

Archdiocese of Boston Settles Six Clergy Abuse Lawsuits Dating Back Decades, Bos. Globe

(July 28, 2021, 11:43 PM), https://www.bostonglobe.com/2021/07/28/metro/archdiocese-

boston-settles-lawsuits-over-six-priests-accused-sexual-abuse [https://perma.cc/5D23-S78J]

(reporting on the settlement of abuse claims from alleged conduct dating back to 1966 through

1990).

1298 Virginia Law Review [Vol. 109:1261

the length of time that stories appear in the media about the history of

abuse overlooked by that diocese. Between 2004 and 2022, that attraction

has led twenty-eight dioceses and three nonprofit organizations affiliated

with Catholic religious orders, such as the Christian Brothers of Ireland,

to file chapter 11.

212

Through these thirty-one cases, the Catholic Church

has honed its use of Code provisions and bankruptcy judges’ willingness

to call on their powers to force all survivors to come forward, to ensure

that every abuse claim is settled, to cabin which assets are available to

fund settlements, and to extend injunctions and releases to parishes and

other third parties.

213

When the Boston Archdiocese was contemplating filing chapter 11,

Yair Listokin and Kenneth Ayotte wrote that it seemed like “a candidate

for a bankruptcy trust, given the number of molestation-related claims

against it and the possibility of many claimants failing to come forward

immediately.”

214

The trust envisioned by Listokin and Ayotte likely was

similar to the trust in Johns-Manville or Robins. Abuse survivors could

choose to litigate their claims outside bankruptcy and then ask the trust

for payment or to settle and receive payment from the trust quickly.

Listokin’s and Ayotte’s noting of people failing to come forward

immediately likely was a reference to the ability of chapter 11 to deal with

future claims. Indeed, the article in which they wrote this sentence focuses

on protecting future claimants.

215

Neither of these assumptions actually occur in diocese cases. Instead,

survivors are pushed into settlements. And they generally must come

forward or lose their ability to litigate.

The chapter 11 case of In re Archdiocese of Saint Paul & Minneapolis,

filed in 2015, is particularly instructive.

216

Almost all the Catholic cases

have been filed on the eve of trials or after a few settlements had been

212

See Catholic Dioceses in Bankruptcy, Pa. St. L. eLibr., https://elibrary.law.psu.edu/

bankruptcy [https://perma.cc/JW6J-HB25] (last visited Mar. 13, 2023) (collecting diocese

filings); Voluntary Petition, In re Christian Bros. of Ir., Inc., No. 11-bk-22820 (Bankr.

S.D.N.Y. filed Apr. 28, 2011).

213

See Kristina Cooke, Mike Spector, Benjamin Lesser, Dan Levine & Disha

Raychaudhuri, Special Report: Boy Scouts, Catholic Dioceses Find Haven from Sex Abuse

Suits in Bankruptcy, Reuters (Dec. 30, 2022, 6:07 AM), https://www.reuters.com/world/us/bo

y-scouts-catholic-dioceses-find-haven-sex-abuse-suits-bankruptcy-2022-12-30 [https://perm

a.cc/J3GE-SFJM] (discussing the Catholic Church’s use of chapter 11).

214

Listokin & Ayotte, supra note 126, at 1437.

215

Id. at 1435.

216

Voluntary Petition, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125

(Bankr. D. Minn. filed Jan. 16, 2015).

2023] Silencing Litigation Through Bankruptcy 1299

reached.

217

The Saint Paul and Minneapolis Archdiocese filed days prior

to the scheduled start of three civil trials.

218

At the time of filing, all of the potential abuse of children by employees

(priests, bishops, teachers, and similar) had occurred, bringing any

lawsuits arising from alleged abuse into the case. Because the abused

children—now typically adults—knew they had been abused, the issue of

how to handle future claims faded. Survivors had to submit a claim by the

bar date. Although the equivalent of future claims representatives could

have been appointed, the bankruptcy judge in the Archdiocese of Saint

Paul & Minneapolis case denied the request to appoint a legal

representative for the interests of unknown abuse claimants.

219

There also

was no need to craft trust procedures to account for the manifestation of

latent injuries, as with asbestos. Instead, the official committee of

unsecured creditors, in coordination with attorneys retained by individual

survivors, negotiated on behalf of all survivors who submitted claims.

220

The Archdiocese of Saint Paul & Minneapolis case established both

the timing for and how a debtor must notify people that they must submit

a claim or lose their ability to allege abuse. When the judge set the bar

date for about six months after the diocese filed, which is typical for

chapter 11 cases, an attorney representing many of the known survivors,

objected, arguing that “[b]ecause of the psychological issues victims of

217

See Reilly, supra note 208, at 873 n.4 (noting that the Archdiocese of Portland filed

chapter 11 right before jury selection in a civil sexual abuse trial); Michael R. Sisak & David

R. Martin, Suburban NY Diocese Files for Bankruptcy Amid Abuse Lawsuits, AP News (Oct.

1, 2020), https://apnews.com/article/virus-outbreak-new-york-sexual-abuse-by-clergy-lawsui

ts-sexual-abuse-3287a82c35430451bd3ad70641ba68b8 [https://perma.cc/2CWX-WS9D]

(noting that the Diocese of Rockville Centre filed chapter 11 after the state appeals court

refused to halt lawsuits brought against it).

218

Jean Hopfensperger, St. Paul Archdiocese Declares Bankruptcy, Calling It ‘Fairest’

Recourse, Star Trib. (Feb. 2, 2015, 1:30 PM), https://www.startribune.com/jan-16-archdiocese

-s-bankruptcy-freezes-lawsuits/288823511 [https://perma.cc/2RB8-M5A8].

219

Order Denying the Motion of the Debtor for an Order Creating a Legal Representative

for the Interests of Future Abuse Claimants, Including Minors, and Appointing the Initial

Representative, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125 (Bankr. D.

Minn. Oct. 30, 2015), ECF No. 458.

220

Second Amended Chapter 11 Plan of Reorganization of the Official Committee of

Unsecured Creditors of the Archdiocese of Saint Paul and Minnesota at 1, 11, 15, In re

Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. Dec. 19, 2016),

ECF No. 890.

1300 Virginia Law Review [Vol. 109:1261

sexual abuse face, . . . they needed as much time as possible to file

claims.”

221

The judge did not alter the bar date.

222

Subsequently, the official unsecured creditors’ committee, which was

comprised of five clergy abuse survivors, requested that the court order

all 187 parishes within the Saint Paul and Minneapolis diocese to play a

seven-minute video in which three abuse claimants explain the necessity

of filing a claim by the bar date and discuss, from their perspectives, why

coming forward was important for survivors and for the Catholic

Church.

223

The committee stressed that survivors needed special

assurances and support to come forward.

224

In response, the diocese and parishes urged the court to find that

procedures approved by the court that required placement of notices of

the diocese’s bankruptcy filing and the bar date in a variety of newspapers

and mediums likely to be read by parishioners was sufficient to notify

potential claimants that they had to come forward or lose their rights.

225

The judge agreed with the diocese and parishes, thereby setting the

standard for bringing survivors into onslaught litigation chapter 11

221

Deadline Set for Filing Claims Against Archdiocese, Archdiocese of Saint Paul &

Minneapolis (Apr. 17, 2015), https://www.archspm.org/deadline-set-for-filing-claims-again

st-archdiocese [https://perma.cc/6UU9-JGGM].

222

Associated Press, Judge Won’t Extend Deadline for Minnesota Archdiocese Claims,

TwinCities Pioneer Press (Oct. 28, 2015, 9:32 PM), https://www.twincities.com/2015/07/29/

judge-wont-extend-deadline-for-minnesota-archdiocese-claims/ [https://perma.cc/6E5Q-MT

DC].

223

Notice of Hearing and Verified Motion of the Official Committee of Unsecured Creditors

for an Order (1) Granting Expedited Relief and (2) Approving Additional Notice Procedures

at 3–5, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125 (Bankr. D. Minn.

June 29, 2015), ECF No. 270; Pamela Foohey, Notifying Potential Claimants in Diocese

Chapter 11 Cases, Credit Slips (June 30, 2015, 5:28 PM), https://www.creditslips.org/

creditslips/2015/06/notifying-potential-abuse-claimants-in-diocese-chapter-11-cases.html

[https://perma.cc/K666-CP5C] (discussing the video and motion).

224

Transcript of Proceedings on July 9, 2015 at 21, In re Archdiocese of Saint Paul &

Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. July 17, 2015), ECF No. 298 (“I have worked

with survivors for 32 years. I have learned how they can be reached and how hard it is for

them to be. I have lived it. I know it. I urge the court to allow this to be played so that some

of them can be reached.” (quoting the committees’ attorney)).

225

Response of the Official Parish Committee of Unsecured Creditors to the Motion of the

Official Committee of Unsecured Creditors for Approval of Additional Notice Procedures at

1–3, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. July

7, 2015), ECF No. 278; Response of the Archdiocese of Saint Paul and Minneapolis to Motion

of the Official Committee of Unsecured Creditors for an Order (1) Granting Expedited Relief

and (2) Approving Additional Notice Procedures at 3, In re Archdiocese of Saint Paul &

Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. July 7, 2015), ECF No. 279.

2023] Silencing Litigation Through Bankruptcy 1301

cases.

226

Survivors were notified largely through newspapers and had

approximately six months after the diocese filed chapter 11 to submit their

claims.

227

With all abuse claims collected, the diocese turned to negotiating a

settlement with survivors and insurers. Unlike in Johns-Manville, or even

Robins, the goal was to resolve every claim. In addition to binding every

survivor who filed a claim and insurers, the settlement also established

how much money in terms of assets and property the diocese could

contribute, plus those funds contributed by parishes and other entities

potentially liable for the abuse—in return for channeling injunctions and

third-party releases.

228

Another key aspect of the case was establishing that parishes and other

entities affiliated with the diocese were considered independent for the

purposes of which assets were available to pay survivors.

229

Parishes may

voluntarily contribute funds to the trust, but they usually do so only if they

receive releases and if claims against them are channeled to the trust. The

Saint Paul and Minneapolis Archdiocese’s final settlement provided for

$210 million to be distributed to 450 survivors. Insurance carriers

contributed $170 million. The diocese and parishes contributed $40

million. The funds were placed in a trust to be managed by a trustee, who

would determine individual awards.

230

The parishes received third-party

226

Order Denying Motion for Additional Notice Procedures, In re Archdiocese of Saint Paul

& Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. July 9, 2015), ECF No. 285.

227

Elizabeth Mohr, Claims Against St. Paul Archdiocese Flood in as Deadline Approaches,

TwinCities Pioneer Press (Oct. 25, 2015, 12:30 AM), https://www.twincities.com/2015/07/15/

claims-against-st-paul-archdiocese-flood-in-as-deadline-approaches/ [https://perma.cc/Z8P6-

XH2W].

228

Disclosure Statement for Chapter 11 Plan of Reorganization of the Archdiocese of Saint

Paul and Minnesota at 2–4, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-30125

(Bankr. D. Minn. May 26, 2016), ECF 656.

229

See Reilly, supra note 208, at 884–90 (overviewing how courts have decided that parish

property is not property of the bankruptcy estate); Vanessa Romo, Minnesota Archdiocese

Reaches $210 Million Settlement With 450 Clergy Abuse Victims, NPR (June 1, 2018, 11:48

PM), https://www.npr.org/sections/thetwo-way/2018/06/01/616187545/minnesota-archdioce

se-reaches-210-million-settlement-with-450-clergy-abuse-victi [https://perma.cc/6YKM-QU

AW] (“One of the most recent delays in the proceedings was a dispute over whether parishes

and other nonprofit entities are considered independent or part of the archdiocese, in which

case their assets could theoretically be sold off to cover the cost of damages.”). Another

question is whether property held by parishes, trusts, and other entities affiliated with a diocese

can be brought into the estate via avoidance actions or substantive consolidation; these

arguments have failed. See Reilly, supra note 208, at 890–97 (discussing these arguments).

230

See Romo, supra note 229 (detailing the settlement); Third Amended Joint Chapter 11

Plan of Reorganization of the Archdiocese of Saint Paul and Minneapolis, In re Archdiocese

1302 Virginia Law Review [Vol. 109:1261

releases. Also among the “Protected Parties,” as defined by the

reorganization plan were three schools, a youth camp, a youth center, and

seminaries.

231

The list of entities that received third-party releases in the Archdiocese

of Saint Paul & Minneapolis case matches that of other Catholic cases.

For example, as detailed by Lindsey Simon, the Diocese of New Ulm’s

settlement and reorganization plan provided for the release of five

insurance carriers, the eighty-two parishes within the diocese, the area

Catholic schools, “the employees of the church including all the priests

and nuns, and all other related entities, including the Catholic Church.”

232

Also as discussed by Simon, New Ulm succeeded in stretching the

limits of how a debtor can ensure that every abuse claim is settled once

and for all. The settlement approved in that case provided for

compensation of survivors from a trust, with individual awards

determined by a “Survivor Claims Reviewer.”

233

A survivor’s only

avenue to appeal the determination of the reviewer was to the reviewer

itself. Survivors were required to appeal within ten days of the reviewer’s

determination and to include a $500 check with the appeal.

234

In coming years, more dioceses almost certainly will file chapter 11,

allowing the Catholic Church to continue to hone its use of bankruptcy.

In the most recent diocese bankruptcies, survivors have balked at global

settlements, demanding more money and the preservation of their claims

against insurers. The Diocese of Camden, which filed chapter 11 in

October 2020,

235

initially proposed a plan that would pay survivors $90

million. This amount included $30 million contributed by insurers, in

return for channeling injunctions and third-party releases.

236

Survivors

strongly opposed the settlement and plan. The diocese subsequently made

of Saint Paul & Minneapolis, No. 15-bk-30125 (Bankr. D. Minn. Sept. 19, 2018), ECF No.

1262.

231

Third Amended Joint Chapter 11 Plan of Reorganization of the Archdiocese of Saint

Paul and Minneapolis at 7, 11, In re Archdiocese of Saint Paul & Minneapolis, No. 15-bk-

30125 (Bankr. D. Minn. Sept. 19, 2018), ECF No. 1262.

232

Simon, Bankruptcy Grifters, supra note 24, at 1202.

233

Id. at 1201.

234

Id.

235

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Diocese of Camden,

N.J., No. 20-bk-21257 (Bankr. D.N.J. Oct. 1, 2020).

236

See James Nani & Alex Wolf, Bankrupt Catholic Dioceses’ Victim Payout Deals Spurn

Insurers, Bloomberg L. (Nov. 17, 2022, 5:00 AM), https://news.bloomberglaw.com/bank

ruptcy-law/bankrupt-catholic-dioceses-victim-payout-deals-spurn-insurers [https://perma.cc/

BKK5-H4QA] (overviewing case history).

2023] Silencing Litigation Through Bankruptcy 1303

a new deal with the official committee of tort victims whereby it and

parishes would pay $87.5 million to survivors, while preserving

survivors’ rights to sue insurers.

237

This result maintained survivors’

voice going forward, plus allowed for more survivors to come forward

and sue the insurers directly.

The blueprint the Catholic Church laid out for collecting and settling

claims has been followed by for-profit and nonprofit corporations in

several high-profile reorganizations. Following allegations of sexual

misconduct against its founder, Bikram Choudhury, which resulted in

millions of dollars of judgments, in November 2017, Bikram Yoga filed

chapter 11, with the hope of reviving the yoga chain.

238

The Weinstein

Company (“TWC”) filed chapter 11 in March 2018, soon after Jodi

Kantor’s and Megan Twohey’s reporting in The New York Times of

Harvey Weinstein’s career-long sexual harassment and assault, which

resulted in almost 100 women alleging abuse.

239

The filing also was a

month on the heels of the New York Attorney General’s “investigation

into violations of human rights law, anti-discrimination law, denial of

equal protection under state civil rights law, and illegal business conduct”

stemming from TWC’s repeated enabling of Weinstein’s abuse.

240

As 2018 drew to a close, two years after The Indianapolis Star reported

the sexual abuse committed by USA Gymnastics’ physician Larry

237

See id. (detailing this deal).

238

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Bikram Choudhury

Yoga Inc., No. 17-bk-12046 (Bankr. C.D. Cal. Nov. 9, 2017); Richard Godwin, ‘He Said He

Could Do What He Wanted’: The Scandal that Rocked Bikram Yoga, Guardian (Feb. 18,

2017), https://www.theguardian.com/lifeandstyle/2017/feb/18/bikram-hot-yoga-scandal-cho

udhury-what-he-wanted [https://perma.cc/9H2K-VNNL]; Tracy Rucinski, Bikram Yoga

Guru Seeks Bankruptcy in Wake of Harassment Claims, Reuters (Nov. 10, 2017, 3:55 PM),

https://www.reuters.com/article/us-bikram-choudhury-yoga-bankruptcy/bikram-yoga-guru-

seeks-bankruptcy-in-wake-of-harassment-claims-idUSKBN1DA2SA [https://perma.cc/5D

6H-H2K8].

239

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Weinstein Co.

Holdings, No. 18-bk-10601 (Bankr. D. Del. Mar. 19, 2018); Jodi Kantor & Megan Twohey,

Harvey Weinstein Paid Off Sexual Harassment Accusers for Decades, N.Y. Times (Oct. 5,

2017), https://www.nytimes.com/2017/10/05/us/harvey-weinstein-harassment-allegations.

html [https://perma.cc/XG85-JRY3]; Schonbek, supra note 12.

240

Jacoby, Fake and Real People in Bankruptcy, supra note 139 (manuscript at 15); see also

Jacoby, Unbundling Business Bankruptcy Law, supra note 90, at 5–6, 16–24 (using TWC as

a case study of “bankruptcy à la carte”).

1304 Virginia Law Review [Vol. 109:1261

Nassar,

241

USA Gymnastics filed chapter 11.

242

About a year later, in

February 2020, the Boy Scouts of America (“BSA”) filed chapter 11 to

deal with nearly 2,000 claims of sexual abuse across decades.

243

These

four cases focused on forcing survivors to come forward and settle their

claims, bypassing requests for discovery, and looping in third parties with

channeling injunctions and non-debtor releases.

244

B. Widespread Wrongdoings: Purdue Pharma

Of all of the chapter 11 filings connected with onslaught litigation in

recent years, Purdue Pharma’s filing in September 2019

245

has garnered

the most attention.

246

Its proceeding incorporated every key aspect of

prior mass tort chapter 11 cases.

247

241

Tim Evans, Mark Alesia & Marisa Kwiatkowski, Former USA Gymnastics Doctor

Accused of Abuse, Indianapolis Star, https://www.indystar.com/story/news/2016/09/12/form

er-usa-gymnastics-doctor-accused-abuse/89995734 [https://perma.cc/6JDF-TH7U] (Jan. 24,

2018, 4:35 PM) (originally published on Sept. 12, 2016, at 3:46 PM).

242

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re USA Gymnastics,

No. 18-bk-09108 (Bankr. S.D. Ind. Dec. 5, 2018).

243

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Boy Scouts of Am.,

No. 20-bk-10343 (Bankr. D. Del. Feb. 18, 2020); Simon, Bankruptcy Grifters, supra note 24,

at 1197.

244

See Simon, Bankruptcy Grifters, supra note 24, at 1195–200 (overviewing the USA

Gymnastics and BSA cases); Becky Yerak, Bikram Choudhury’s Yoga Business Files for

Chapter 11 Bankruptcy, Wall St. J. (Nov. 10, 2017, 4:50 PM), https://www.wsj.com/articles/

bikram-choudhurys-yoga-business-files-for-chapter-11-bankruptcy-1510333163

[https://perma.cc/7J2X-BNE8] (discussing the Bikram Yoga filing). See generally Jacoby,

Unbundling Business Bankruptcy Law, supra note 90 (describing the Weinstein proceedings).

245

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Purdue Pharma Inc.,

No. 19-bk-23648 (Bankr. S.D.N.Y. Sept. 15, 2019).

246

See, e.g., Levitin, Purdue’s Poison Pill, supra note 24, at 1083 (using the Purdue Pharma

case to illustrate how the chapter 11 system’s checks and balances have broken down); Lipson,

The Rule of the Deal, supra note 9, at 62–63 (using the Purdue Pharma bankruptcy to discuss

how bankruptcy law supports confidential deals); Organek, supra note 133, at 364–67 (arguing

that the Purdue Pharma chapter 11 settlement was not abusive and that the Sacklers should not

be required to file bankruptcy). Purdue Pharma has been the subject of several books. See

generally Ryan Hampton with Claire Rudy Foster & Hillel Aron, Unsettled: How the Purdue

Pharma Bankruptcy Failed the Victims of the American Overdose Crisis (2021); Patrick

Radden Keefe, Empire of Pain: The Secret History of the Sackler Dynasty (2021); Beth Macy,

Dopesick: Dealers, Doctors, and the Drug Company that Addicted America (2018).

247

Purdue Pharma also aggressively attempted to halt police and regulatory activity via

chapter 11, against which some states unsuccessfully fought. Peg Brickley, Bankruptcy Judge

Pushes Purdue Into Talks With States Over Sackler Family Legal Shield, Wall St. J. (Oct. 11,

2019, 7:15 PM), https://www.wsj.com/articles/bankruptcy-judge-pushes-purdue-into-talks-

with-states-over-sackler-family-shield-11570829855 [https://perma.cc/6ZGH-469X]; Mike

Spector, Nate Raymond & Tom Hals, U.S. States Fight Back Against Purdue’s Bid to Halt

2023] Silencing Litigation Through Bankruptcy 1305

When it filed, Purdue Pharma was the defendant in over 2,600 civil

actions stemming from its production of OxyContin. None of the actions

had produced judgments, but Purdue Pharma faced significant litigation

costs and the Sacklers faced the potential to have to pay the more than

$10 billion to opioid addiction survivors and their families.

248

Purdue

Pharma had little debt when it filed; the tort claimants were its only

creditors.

249

It wanted to use chapter 11 to confirm a pre-negotiated

settlement with certain plaintiffs, including twenty-four attorneys general

and the executive committee in a pending MDL, that would release the

Sacklers from all claims.

250

Stated succinctly, Purdue Pharma and the

Sacklers planned to put the opioid litigation to rest quickly, with as little

public scrutiny as possible, using bankruptcy.

251

The case began with a request for an expansive automatic stay that

covered the Sackler family and government agencies.

252

It continued with

the quashing of requests for discovery, calls to permit a “bellwether”

litigation, and the appointment of an examiner, even though the Code

technically required an examiner’s appointment.

253

Instead, Purdue

Pharma proposed that the Sacklers would disclose information necessary

for creditors to assess the settlement, provided that those parties privy to

the information could not disclose what they learned publicly.

254

Purdue

Pharma then sought approval of its proposed settlement and plan.

Opioid Lawsuits, Reuters (Oct. 4, 2019, 7:14 AM), https://www.reuters.com/article/uk-

purduepharma-bankruptcy/u-s-states-fight-back-against-purdues-bid-to-halt-opioid-lawsuits-

idUKKBN1WJ19Y [https://perma.cc/7ML4-4ZEN].

248

Levitin, Purdue’s Poison Pill, supra note 24, at 1103–04; Organek, supra note 133, at

363.

249

See Levitin, Purdue’s Poison Pill, supra note 24, at 1103–04 (detailing the path to Purdue

Pharma’s filing).

250

Id. at 1104–05; Lipson, The Rule of the Deal, supra note 9, at 63 (overviewing the

settlement).

251

See Lipson, First in Time, supra note 24, at 37 (noting that “many opioid survivors and

activists feared that the Sacklers were using the bankruptcy of their company, Purdue Pharma,

to ‘get away with it’”); Lipson, The Rule of the Deal, supra note 9, at 62 (“The Sacklers

wanted to shield as much information as possible.”).

252

See Lipson, First in Time, supra note 24, at 47 (noting the “sprawling injunction”);

Organek, supra note 133, at 368–69 (discussing the automatic stay); Simon, Bankruptcy

Grifters, supra note 24, at 1188 (same); supra note 247.

253

11 U.S.C. § 1104(c); Lipson, First in Time, supra note 24, at 49 (discussing the treatment

of requests); Lipson, The Rule of the Deal, supra note 9, at 74–76 (discussing the judge’s

rejection of calls for bellwether litigation and requests for an examiner); Lipson Letter, supra

note 116 (calling on the Office of the United States Trustee to seek an order to appoint an

examiner pursuant to 11 U.S.C. § 1104(c)).

254

See Lipson, First in Time, supra note 24, at 48 (detailing this stipulation).

1306 Virginia Law Review [Vol. 109:1261

At this point, now famously, the case went off the rails, at least from

Purdue Pharma executives’ and the Sacklers’ perspectives. Mediation

required three phases that spanned eighteen months.

255

The mediations

resulted in a proposed reorganization plan under which the Sacklers

contributed about $4.5 billion and transferred all insurance claims to

governmental creditors, the Sacklers were prohibited from doing business

in the opioid industry, Purdue Pharma became a public benefit company,

and two philanthropic trusts were established with funding exclusively

for opioid crisis abatement.

256

In exchange, all creditors released all civil

claims against the Sacklers.

257

The expansive releases were the most controversial aspect of the plan.

Individual tort claimants would receive between $3,500 and $48,000

based on the specifics of their claim, as disclosed on a separate form they

were required to submit (in addition to their already-submitted proof of

claim).

258

The releases sparked outrage among the claimants.

259

Purdue

Pharma argued that the broad releases were the linchpin of the plan.

Without them, the settlement would fall apart.

260

Judge Robert Drain, the bankruptcy judge overseeing the case,

confirmed the plan with some minor changes.

261

In confirming the plan,

Judge Drain expressed disappointment that mediation had not resulted in

the Sacklers contributing more money to survivors and their families—a

focus on value recovery traditionally associated with business bankruptcy

255

See Organek, supra note 133, at 369 (noting the mediations).

256

Id. at 369–70.

257

See id. (overviewing the terms of this proposed plan); Simon, Bankruptcy Grifters, supra

note 24, at 1190–91 (“The trust procedures allow a claimant to pursue their personal-injury

claim in the tort system, but only if they affirmatively opt out on the claim form.”).

258

See Simon, Bankruptcy Grifters, supra note 24, at 1190–91 (detailing tort claimants’

rights).

259

John Seewer & Geoff Mulvihill, Deal with OxyContin Maker Leaves Families Angry,

Conflicted, PBS News Hour (Sept. 2, 2021, 2:17 PM), https://www.pbs.org/newshour/nation/

deal-with-oxycontin-maker-leaves-families-angry-conflicted [https://perma.cc/US5T-L39T].

260

See Organek, supra note 133, at 370–71 (“The releases were seen by plan proponents

(the Sackler family most prominent, but far from alone, among them) as essential to the

plan . . . .”). Although 95% of creditors that cast votes supported the plan, that Purdue Pharma

engineered the plan process such that only it could put forth a plan undercuts this vote.

Creditors had to support the plan or forfeit all value. Levitin, Purdue’s Poison Pill, supra note

24, at 1117–18.

261

In re Purdue Pharma L.P., 633 B.R. 53, 115 (Bankr. S.D.N.Y. 2021) (confirming

Purdue’s plan with amendments in sections 5.8, 10.07(b), and 11.1(e)); Simon, Bankruptcy

Grifters, supra note 24, at 1189–91 (detailing Purdue’s plan). For how and why Purdue Pharma

and the Sacklers chose Judge Drain, see Levitin, Purdue’s Poison Pill, supra note 24, at 1131–

48; Lipson, The Rule of the Deal, supra note 9, at 64–69.

2023] Silencing Litigation Through Bankruptcy 1307

cases.

262

Notably, he said little about the denial of survivors’ ability to

have a voice or overall lack of transparency. The confirmation decision

mentioned the document depository aspect of the settlement, and the plan

promised a public document repository.

263

The United States Trustee and several government entities appealed the

confirmation. The district court held that the Code does not permit non-

consensual third-party releases and vacated the plan.

264

The Sacklers

appealed this decision to the Second Circuit, which ruled in favor of

Purdue Pharma’s reorganization plan, thereby affirming Purdue Pharma’s

use of nonconsensual third-party releases.

265

Simultaneous with this

appeal, a fourth round of mediation began.

266

This mediation resulted in

the Sacklers agreeing to increase their contribution by more than a billion,

bringing their total contribution to about $5.5 billion.

267

Although Purdue Pharma’s chapter 11 case sparked more intense

scrutiny of the Sacklers and third-party releases than the Sacklers and

Purdue Pharma ever intended, the core of what the bankruptcy court

allowed and approved reflects the progression of mass tort bankruptcies

from asbestos through the Catholic dioceses. All survivors and their

families were forced to come forward. Their ability to hold the Sacklers

accountable occurred via class representatives and behind closed doors.

They were bound to a plan that exceedingly limited their ability to launch

their own lawsuits against the Sacklers and related entities. And though

the plan ultimately provided for some public disclosure of documents,

268

the case’s conclusion largely would end scrutiny of the Sacklers and

Purdue Pharma.

269

262

Organek, supra note 133, at 371.

263

In re Purdue Pharma L.P., 633 B.R. at 114; Lipson, The Rule of the Deal, supra note 9,

at 73 & n.175.

264

In re Purdue Pharma L.P., 635 B.R. 26, 37–38 (S.D.N.Y. 2021).

265

In re Purdue Pharma L.P., 69 F.4th 45, 57 (2d Cir. 2023).

266

See Lipson, The Rule of the Deal, supra note 9, at 73 (noting that the settlement “would

be negotiated through four court-ordered mediations”).

267

See id. (“[T]he Sacklers raised their offer from $3 billion to about $5.5 billion, which

sounds significant, but they also doubled the payout period.”). The Sacklers negotiated

changes to their non-monetary obligations. See Organek, supra note 133, at 371–72 (detailing

these changes). This fourth mediation produced the hearing during which over two dozen

individuals spoke directly to three members of the Sackler family. Mediator’s Fourth Interim

Report at 8, In re Purdue Pharma L.P., No. 19-23649 (Bankr. S.D.N.Y. Mar. 3, 2022), ECF

No. 4409; supra notes 1–4 and accompanying text.

268

See supra note 263 and accompanying text.

269

Some arguments before the Second Circuit focused on Purdue Pharma’s bad faith in

filing and proposing the reorganization plan. See Brief of Amici Curiae Law Professors in

1308 Virginia Law Review [Vol. 109:1261

C. Beyond Product Liability: Infowars and Alex Jones

The latest wave of mass tort bankruptcies stretches the innovations of

prior cases in an attempt to further cabin available assets and disclosure

obligations. J&J’s chapter 11 filing of a specially created subsidiary,

named LTL Management, where it dumped (for lack of a better term) all

potential liability stemming from its talcum powder marked a much

criticized move from placing an entire corporation in bankruptcy to only

dealing with specific tort issues.

270

This filing received significant

attention, particularly for its “brazen” use of bankruptcy to ensure that

“deeper-pocketed and more culpable parties” would not be the actual

debtor.

271

The Third Circuit’s dismissal of LTL’s filing for lack of good

faith brings into question using specially created subsidiaries to effectuate

reorganization.

272

Along with the strategic placement of subsidiaries into bankruptcy, a

prominent set of chapter 11 filings in 2022 moved beyond the product

liability and sexual abuse of earlier bankruptcies and seemingly targeted

limiting information disclosure. In April 2022, after losing defamation

suits relating to Alex Jones’s lies about the Sandy Hook Elementary

School shooting being a hoax, but before damage awards were set, Jones

placed three business entities affiliated with his Infowars website into

chapter 11.

273

The stated reason for the filings was to resolve the liability

on the suits for about $10 million while releasing Jones and his

companies.

274

The Department of Justice immediately called the filings

abusive.

275

Rather than wait for the bankruptcy judge to assess

Support of Appellees Regarding the “Abuse” Standard at 7–8, In re Purdue Pharma, L.P., No.

22-110 (2d Cir. Mar. 22, 2022), ECF No. 639 (detailing bad faith).

270

See Jacoby, Fake and Real People in Bankruptcy, supra note 139 (manuscript at 13)

(discussing this filing).

271

Id. at 12.

272

Tom Hals, Mike Spector & Dan Levine, U.S. Court Rejects J&J Bankruptcy Strategy for

Thousands of Talc Lawsuits, Reuters (Jan. 31, 2023, 8:43 AM), https://www.reuters.com/leg

al/jjs-ltl-units-bankruptcy-dismissed-by-us-appeals-court-filing-2023-01-30 [https://perma.cc

/5P4S-LBHW]; see supra note 120 and accompanying text.

273

Debtors’ Emergency Motion for Joint Administration of Chapter 11 Cases, In re InfoW,

LLC, No. 22-bk-60020 (Bankr. S.D. Tex. Apr. 18, 2022), ECF No. 5 (filing chapter 11 for

InfoW, LLC, IWHealth, LLC, and Prison Planet TV, LLC).

274

Mike Spector & Dietrich Knauth, Conspiracy Website Infowars Parent Files for

Bankruptcy, Reuters (July 29, 2022, 8:54 PM), https://www.reuters.com/business/media-tele

com/infowars-parent-files-bankruptcy-2022-07-29 [https://perma.cc/5GCB-FB8X].

275

Steven Church, Infowars Bankruptcy May Be ‘Abuse’ of Court Rules, DOJ Warns,

Bloomberg L. (Apr. 22, 2022, 10:14 AM), https://www.bloomberglaw.com/product/blaw/

2023] Silencing Litigation Through Bankruptcy 1309

abusiveness, the plaintiffs in the defamation suits dropped the entities as

defendants from the litigation. With no purpose for the chapter 11 cases,

the three entities asked for a voluntary dismissal of the proceedings.

276

That did not end Jones’s or Infowars’s attempts to use the business

bankruptcy system to deal with the defamation suits and ostensibly to

avoid oversight. In July 2022, Infowars’s parent company, Free Speech

Systems LLC, filed chapter 11.

277

The filing came in the midst of a trial

in Texas to determine the damage award for parents of victims of the

Sandy Hook shooting.

278

Free Speech Systems used the Code’s new

subchapter V, which requires debtors to have under $7.5 million in

debts,

279

and which comes with fewer reporting requirements and less

oversight than a typical chapter 11 proceeding.

280

Free Speech Systems’s

eligibility for subchapter V hinged on the defamation suits’ damage

awards not yet being set.

281

Once the current trial concluded, the damages

awarded undoubtedly would increase Free Speech Systems’ debts far

above the eligibility threshold.

282

(The Texas jury subsequently awarded

two parents about $50 million.

283

)

bloomberglawnews/bloomberg-law-news/XBQADC74000000 [https://perma.cc/7M72-KK

UW].

276

Spector & Knauth, supra note 274.

277

Voluntary Petition for Non-Individuals Filing for Bankruptcy, In re Free Speech Sys.

LLC, No. 22-bk-60043 (Bankr. S.D. Tex. July 29, 2022).

278

Kate Marino, Alex Jones Uses Bankruptcy to Limit Sandy Hook Reckoning, Again,

Axios (Aug. 3, 2022), https://www.axios.com/2022/08/03/alex-jones-sandy-hook-trial-bankr

uptcy [https://perma.cc/QMZ3-LP96].

279

Lance P. Martin, Subchapter V Debt Ceiling Restored to $7.5 Million, Ward & Smith,

P.A. (June 23, 2022), https://www.wardandsmith.com/articles/subchapter-v-debt-ceiling-rest

ored-to-75-million [https://perma.cc/539G-LMWE].

280

See Jonathan Friedland, Christopher M. Cahill, Mark Melickian, Jack O’Connor & Hajar

Jouglaf, Subchapter V of Chapter 11: A User’s Guide, DailyDAC (Oct. 18, 2021),

https://www.dailydac.com/subchapter-v-of-chapter-11-the-complete-users-guide/

[https://perma.cc/2XLY-HF5N] (comparing a traditional chapter 11 case to a subchapter V

case).

281

Marino, supra note 278.

282

Id.; William Melhado, Alex Jones’ Company Files for Bankruptcy Midway Through

Sandy Hook Damages Trial, Tex. Trib. (July 30, 2022, 4:00 PM), https://www.texastribune.

org/2022/07/30/alex-jones-company-bankruptcy/ [https://perma.cc/7XC9-C23S].

283

James Nani, Infowars’ Bankruptcy Judge Removes Top Advisors, Orders Probe,

Bloomberg L. (Sept. 21, 2022, 12:25 PM), https://www.bloomberglaw.com/bloomberglaw

news/bankruptcy-law/X3U9K6BG000000 [https://perma.cc/3E79-SPQX]. Jones tried and

failed to have the award reduced. Jack Queen, Alex Jones Loses Bid to Slash $50 Million

Sandy Hook Defamation Verdict, Reuters (Nov. 22, 2022, 8:12 PM), https://www.reuters.com

/legal/alex-jones-loses-bid-slash-50-million-sandy-hook-defamation-verdict-2022-11-22

[https://perma.cc/4TVR-KUA5].

1310 Virginia Law Review [Vol. 109:1261

Deviating from other chapter 11 cases, instead of allowing the

automatic stay to pause the defamation suit, Free Speech Systems asked

that the suit continue. The company specifically wanted to know the

damages figure, which it could resolve through the bankruptcy case.

284

The filing also came two days before jury selection in a Connecticut

trial.

285

The Sandy Hook families’ lawyer called the filing “a stunt by

Alex Jones to try to avoid facing justice.”

286

In subsequent months, Free

Speech Systems faced setbacks in setting who exactly would advise the

debtor business, but succeeded in keeping the Infowars website running

and in continuing to shield financial records.

287

As of this Article’s

writing, the case remains pending.

Alex Jones’s lies perpetrated via his Infowars collections of companies

may seem like an odd choice for a case study, especially because Jones

consented to the continuation of defamation suits in Free Speech

Systems’s chapter 11 case. Nonetheless, what Jones (clumsily) did with

his companies follows the blueprint of the mass tort bankruptcies of the

past couple decades. It thus demonstrates how mass tort bankruptcies are

a subset of chapter 11 cases filed to address the broader idea of onslaught

litigation. That the tort issue that Jones and his companies wanted to deal

with via chapter 11 encompassed only a couple lawsuits makes the

bankruptcy cases easier to dissect. It also reflects a move away from using

chapter 11 to deal with latent tort claims, as with asbestos, to filing

bankruptcy in the wake of allegations of wrongdoing in which all

claimants should know of their harm.

284

Jim Vertuno, Alex Jones’ Media Company Files for Bankruptcy Amid Trial, AP News

(July 29, 2022), https://apnews.com/article/shootings-austin-texas-63f4ecbf7adbb60c2f5dfe

0726b6cb5e [https://perma.cc/G9XA-5HZE].

285

Id. That suit ended in a $965 million damage award. Dave Collins, Alex Jones Seeks

New Trial After $965 Million Verdict in Sandy Hook Lawsuit, AP News (Oct. 22, 2022,

3:00 PM), https://www.pbs.org/newshour/nation/alex-jones-seeks-new-trial-after-965-millio

n-verdict-in-sandy-hook-lawsuit [https://perma.cc/CZ9D-32R5]; Jemima McEvoy, Alex

Jones Likely Doesn’t Have $1 Billion. He Does Own Five Homes in Texas, Though., Forbes

(Oct. 13, 2022, 4:58 PM), https://www.forbes.com/sites/jemimamcevoy/2022/10/13/alex-jon

es-likely-doesnt-have-1-billion-he-does-own-five-homes-in-texas-though [https://perma.cc/

YRU2-DY4B].

286

Melhado, supra note 282.

287

Elizabeth Williamson, Alex Jones Accused of Hiding Assets from Sandy Hook Families,

N.Y. Times (Oct. 12, 2022), https://www.nytimes.com/2022/08/25/us/politics/alex-jones-law

suits-bankruptcy.html [https://perma.cc/4245-8M4L]; Jonathan Randles, Bankruptcy Judge

Orders Independent Review of Alex Jones’s Infowars Over Conflicts, Wall St. J. (Sept. 20,

2022, 11:07 PM), https://www.wsj.com/articles/bankruptcy-judge-orders-independent-review

-of-alex-joness-infowars-over-conflicts-11663729619 [https://perma.cc/6X5L-2C8U].

2023] Silencing Litigation Through Bankruptcy 1311

Through the initial filings of the three Infowars-related entities, Jones

sought third-party releases for himself and the rest of his organization,

which would have ended the lawsuits and likely intense public scrutiny

of his lies. When that failed, through Free Speech Systems’s filing, he

sought to fast-track the defamation lawsuits’ conclusions and to wrap up

his and his companies’ monetary liability. This aspect of bankruptcy

continues to be valuable because Jones allegedly moved millions of

dollars among himself and his companies.

288

The longer those allegations

persist and the longer that a variety of parties have the ability to look into

Jones’s finances, the more his misdeeds will remain in the news.

As if on cue, in December 2022, Alex Jones himself filed chapter 11.

289

The top seventeen of Jones’s twenty largest unsecured creditors were

plaintiffs in the defamation lawsuits.

290

Jones will not be able to discharge

the vast majority of the over one billion dollars that he owes if the court

finds that the conduct that produced the defamation judgments constituted

“willful and malicious injury by the debtor to another entity or to the

property of another.”

291

Because of the procedural history of the

defamation judgments, Jones may be able to litigate the character of his

conduct during the chapter 11 case. This will push off the plaintiffs for

some time, although it seems unlikely that Jones will be granted a

discharge of the judgments.

292

288

Jonathan O’Connell, Sandy Hook Families Sued Alex Jones. Then He Started Moving

Money Around., Wash. Post (Nov. 21, 2022, 7:00 AM), https://www.washingtonpost.com/

investigations/2022/11/21/alex-jones-sandy-hook-lawsuit [https://perma.cc/YJ2X-V29S].

289

Voluntary Petition for Individuals Filing Bankruptcy, In re Alexander E. Jones, No. 22-

bk-33553 (Bankr. S.D. Tex. Dec. 2, 2022); Becky Sullivan, Alex Jones Files for Bankruptcy

Following $1 Billion Sandy Hook Verdicts, NPR (Dec. 2, 2022, 11:13 AM), npr.org/

2022/12/02/1140349600/alex-jones-bankruptcy [https://perma.cc/SXW3-UXSU]. He filed

chapter 11 because his debts were too large to file under chapter 13 and filing chapter 11

allowed him to remain in control of assets. See Adam Levitin, Alex Jones’s Bankruptcy, Credit

Slips (Dec. 2, 2022, 9:39 AM), https://www.creditslips.org/creditslips/2022/12/alex-joness-

bankruptcy.html [https://perma.cc/R865-ARCN] (discussing the potential for the appointment

of a trustee).

290

The eighteenth largest creditor was $150,000 owed to American Express. Voluntary

Petition for Individuals Filing Bankruptcy, In re Alexander E. Jones, No. 22-bk-33553 (Bankr.

S.D. Tex. Dec. 2, 2022), ECF No. 1.

291

11 U.S.C. § 523(a)(6); see also Levitin, supra note 289 (discussing what assets may be

available in Jones’s bankruptcy estate).

292

See Levitin, supra note 289 (discussing application of willful and malicious). In March

2023, the plaintiffs in the defamation cases filed adversary proceedings in Jones’s chapter 11

case, seeking to establish that the judgments cannot be discharged because they were incurred

willfully and maliciously. Leslie A. Pappas, Sandy Hook Families File Ch. 11 Suits Over Debt

1312 Virginia Law Review [Vol. 109:1261

However, Jones may be even more interested in the potential for

leveraging bankruptcy to cabin disclosures. His filing brought skepticism

about his willingness to be forthright and calls for investigations of over

$10 million of donations to Jones from fans.

293

As with dischargeability,

it seems unlikely that Jones will prevail in limiting financial disclosures

and escaping from intense scrutiny of exactly how much money and other

property is available to pay the Sandy Hook families.

294

As compared to

the outcome if he had received third-party releases via the chapter 11

cases of the three Infowars business entities, Jones probably will pay more

to families to resolve his chapter 11 case.

Infowars and Alex Jones illustrate the shift in the use of chapter 11 to

limit disclosures and bypass other protections for creditors designed to be

part of the bankruptcy framework. Compare the likely outcome of Jones’s

case—that he will have to pay all his assets to defamation claimants and

that the debts will not be discharged, allowing the families to continue to

pursue him for years despite his filing bankruptcy—with the full release

and forever resolution that he may have gotten through his companies’

chapter 11 cases. This juxtaposition highlights the attractiveness of

bankruptcy to corporations (and their owners) facing onslaught litigation.

They can twist the bankruptcy system into a silencing device. Infowars

and Alex Jones also highlight that those corporations with access to elite

lawyers versed in how to leverage the chapter 11 process and venue rules

will be more successful at twisting the bankruptcy system. Infowars’s

initial chapter 11 cases failed quickly, in part, because Jones did not have

access to the same elite lawyers as Purdue Pharma and the Sacklers.

Discharge, Law360 (Mar. 13, 2023, 6:59 PM), https://www.law360.com/articles/1585324/

sandy-hook-families-file-ch-11-suits-over-debt-discharge [https://perma.cc/CZZ5-RR53].

293

Rick Archer, Sandy Hook Families ‘Skeptical’ of Jones’ Ch. 11 Disclosures, Law360

(Dec. 7, 2022, 9:15 PM), https://www.law360.com/articles/1555975/sandy-hook-families-

skeptical-of-jones-ch-11-disclosures [https://perma.cc/66XD-5X9G]; James Nani, Sandy

Hook Families to Probe Alex Jones’ $10 Million From Fans, Bloomberg L. (Dec. 7, 2022,

5:21 PM), https://www.bloomberglaw.com/bloomberglawnews/bankruptcy-law/XA1UVF9O

000000 [https://perma.cc/9PEL-R4UG].

294

Bankruptcy courts’ willingness to be more lenient on entities that reorganize than real

people who file bankruptcy seems relevant to how Jones’s personal chapter 11 case is likely

to proceed. See generally Jacoby, Fake and Real People in Bankruptcy, supra note 139

(manuscript at 2–3) (calling out this dichotomy).

2023] Silencing Litigation Through Bankruptcy 1313

IV. BANKRUPT SILENCING

Because of the history of the use of bankruptcy to deal with mass torts,

much of the initial scholarship devoted to onslaught litigation focused on

the specific context of mass tort bankruptcy and on future claimants and

the business that filed, not on channeling injunctions and third-party

releases that now benefit a myriad of non-debtors.

295

This allowed

modern-day mass tort bankruptcies to proliferate with little attention to

the full import of a business’s use of chapter 11. This Part begins by

examining recent scholarship addressing corporations’ innovations in

reorganization, and detailing core elements of procedural justice research

to fill a key gap in current business bankruptcy scholarship. Based on that

merging of literature, it interrogates the harms of utilizing reorganization

to truncate onslaught litigation.

A. Procedural Justice and Bankruptcy

In the last few years, as more mass tort chapter 11 filings made headline

news, scholarship predominately has focused on channeling injunctions

and third-party releases, centering on value recovery to tort claimants,

296

and constitutional, jurisdictional, and procedural concerns.

297

Similarly,

295

See, e.g., Listokin & Ayotte, supra note 126, at 1435–42 (discussing future claimants

without reference to third parties); Resnick, supra note 88, at 2089–90 (mentioning third

parties or non-debtors only in connection with sales of assets); Mark J. Roe, Bankruptcy and

Mass Tort, 84 Colum. L. Rev. 846, 848–49 (1984) (arguing that companies dealing with mass

torts should file chapter 11 earlier in their resolution of litigation claims, and not mentioning

channeling injunctions or third-party releases). But see Brubaker, Bankruptcy Injunctions and

Complex Litigation, supra note 125, at 964–65 (making “the long-overdue challenge to non-

debtor releases”).

296

See, e.g., Organek, supra note 133, at 364 (arguing for the efficiency of channeling

injunctions and third-party releases); Parikh, Scarlet-Lettered Bankruptcy, supra note 24, at

425 (proposing the companies facing mass torts emerge from bankruptcy as public benefit

corporations because, as argued, that would provide greater monetary recovery to tort

claimants); Parikh, The New Mass Torts Bargain, supra note 24, at 455 (proposing

amendments to the Code to “improve predictability, efficiency, and victim recoveries” in mass

tort bankruptcies).

297

See, e.g., Jeanne L. Schroeder & David Gray Carlson, Third Party Releases Under the

Bankruptcy Code After Purdue Pharma, 31 Am. Bankr. Inst. L. Rev. 1, 4 (2023) (analyzing

when the Code authorizes third party releases); Brubaker, Mandatory Aggregation of Mass

Tort Litigation in Bankruptcy, supra note 24, at 965 (“[T]he fundamental illegitimacy of

nondebtor releases is of a constitutional magnitude . . . .”); Sergio Campos & Samir D. Parikh,

Due Process Alignment in Mass Restructurings, 91 Fordham L. Rev. 325, 330–31 (2022)

(focusing on procedures for the selection of a future claims representative and the claims

estimation process); Adam J. Levitin, The Constitutional Problem of Nondebtor Releases in

1314 Virginia Law Review [Vol. 109:1261

the most recent scholarship addresses even newer innovations in mass tort

bankruptcies, calling out how companies pick bankruptcy courts and

judges and bypass Code provisions, though still mainly from the

perspectives of survivors’ monetary recovery and the perversion of the

business bankruptcy system as codified.

298

A few scholars—notably Jonathan Lipson and Melissa Jacoby—have

shifted the discussion from a focus on Code provisions and victim

recoveries to add an explanation of the dynamics (on the ground, as

litigated) that allow companies to use the business bankruptcy system to

advance their agendas. Lipson focuses on what he terms “social debt”

bankruptcies, and details how bankruptcy’s traditional “rule of the deal”

which supports resolving disputes about remedies through negotiations

and confidential deals clashes with investigating allegations of serious

wrongdoings.

299

Jacoby describes how attorneys are adept at portraying

business problems, such as an onslaught of litigation, as emergencies,

such that bankruptcy judges accept quick resolutions that bypass

Bankruptcy, 91 Fordham L. Rev. 429, 430–33 (2022) (arguing that nonconsensual third-party

releases are unconstitutional); Simon, Bankruptcy Grifters, supra note 24, at 1215–16

(concluding that “Congress and the courts should increase disclosure obligations and

strengthen procedural checks before granting nondebtor channeling injunctions and releases

and should mandate baseline procedural protections for channeled claims”).

298

See Anthony J. Casey & Joshua C. Macey, In Defense of Chapter 11 for Mass Torts, 90

U. Chi. L. Rev. 973, 976 (2023) (arguing “that legal innovations such as the two-step

bankruptcy and the third-party release can reduce bankruptcy costs and preserve value for all

claimants”); Janger, supra note 111, at 383 (concluding that bankruptcy “can benefit both the

enterprise and the tort claimants by improving their recovery. It is crucial, however, that these

tools be tethered to their justification in insolvency and subjected to appropriate process

protections”); Adam J. Levitin, Purdue’s Poison Pill, supra note 24, at 1083–84 (calling out

coercive restructuring techniques, lack of appellate review, and judge shopping); Samir D.

Parikh, Mass Exploitation, 170 U. Pa. L. Rev. Online 53, 57 (2022) (discussing divisive

mergers “through the lens of victim recoveries”). Other recent scholarship highlights how

businesses bypass a myriad of Code provisions. See Lynn M. LoPucki, Chapter 11’s Descent

into Lawlessness, 96 Am. Bankr. L.J. 247, 251–53 (2022) (examining how debtors get around

notice requirements and requests to appoint examiners, while controlling plan confirmation,

critical vendor orders, collective bargaining agreements, and retention bonuses); Jared A.

Ellias & Robert J. Stark, Bankruptcy Hardball, 108 Calif. L. Rev. 745, 751 (2020) (detailing

how “clever debtors and their lawyers . . . disable the formal machinery of creditor

protection”).

299

Lipson, The Rule of the Deal, supra note 9, at 43–44 (distinguishing between “rule of

law” and “rule of the deal” and arguing that “social debt” bankruptcies involve more “rule of

law” questions, making bankruptcy, which focuses on the “rule of the deal,” an inappropriate

forum to resolve primarily questions of liability); see also Lipson, Remedial Schemes, supra

note 25, at 1794 (asserting that the bankruptcy judge in Purdue Pharma attempted to shut

down challenges to the proposed settlement).

2023] Silencing Litigation Through Bankruptcy 1315

procedural protections, constitutional authority, and unravel was what

meant to be “[c]hapter 11’s package deal.”

300

Bankruptcy judges’ overall

inclination to “resist treating [businesses that file bankruptcy] as culpable

actors capable of independent wrongdoing,” as Jacoby identifies, “makes

bankruptcy an unreliable partner in the broader societal project of

deterring, punishing, and remedying serious corporate misconduct.”

301

Jacoby further calls out a lack of focus on the nonmonetary interests of

claimants.

302

Missing from these discussions is a primary and sustained focus on

how corporations’ use of bankruptcy to deal with onslaught litigation is

designed to cut short survivors’ process for coping with alleged harms,

303

cabin discovery about the alleged wrongdoing, and bury the possibility of

future public exposure to the problems.

304

This use of reorganization goes

beyond securing releases for grifters.

305

Corporations effectively seek

exoneration. Their leaders hope that chapter 11 will provide that

exoneration not only by allowing for deals that release them of liability

and reduce people’s monetary recovery, but also by suppressing

discussions of the alleged wrongdoings. The silencing potential of their

chapter 11 cases may be most important, even though they couch their

decisions to file in language about providing claimants with equitable

recoveries from limited funds. Through silencing, corporations and third

parties seek to escape the full legal and societal ramifications of alleged

misconduct.

300

Jacoby, Shocking Business Bankruptcy Law, supra note 24, at 411; see also Jacoby,

Unbundling Business Bankruptcy, supra note 90, at 1706–07(focusing on sales and loans in

“unbundled bankruptcies”).

301

Jacoby, Fake and Real People in Bankruptcy, supra note 139 (manuscript at 4).

302

Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 26) (“I have heard

survivors lament that bankruptcy turned [out] to be not about justice, but just dollars and

cents.”).

303

A recent student note focuses on how mass tort bankruptcies bypass survivors’ dignitary

interests and deny them a voice in proceedings. Ella Epstein, Note, The Need for Dignitary

Justice for Tort Creditors in Chapter 11 Bankruptcy, 2022 Colum. Bus. L. Rev. 943, 946.

304

In the context of Purdue Pharma, Jonathan Lipson has focused on how the Sacklers hoped

to use bankruptcy to conceal information and squelch calls for transparency. Lipson, The Rule

of the Deal, supra note 9, at 62; Lipson, Remedial Schemes, supra note 25, at 1778–79, 1793–

94. Melissa Jacoby has discussed the lack of attention to procedural justice and that lack of

attention’s effect on the bankruptcy system’s legitimacy. Jacoby, Corporate Bankruptcy

Hybridity, supra note 91, at 1739–42.

305

See generally Simon, Bankruptcy Grifters, supra note 24 (describing the benefits

obtained by these entities and individuals through the reorganization process).

1316 Virginia Law Review [Vol. 109:1261

The silencing aspect of onslaught litigation bankruptcies also may be

more harmful and more important to many of the plaintiffs who become

claimants in the bankruptcy cases. Likewise largely missing from recent

literature about mass tort bankruptcies is sustained engagement with

research about procedural justice and its connection to due process. This

research focuses on both the formal procedural rules and, perhaps more

significantly, how parties’ treatment in litigation and dispute resolution

influences their feeling about and acceptance of decisions, which, in turn,

affects public perception of the legal system.

306

Litigants desire to have a voice and to be heard by a neutral, trustworthy

decision-maker who is deemed to behave fairly and in an even-handed

manner.

307

In assessing whether they were treated respectfully, litigants

consider consistency and impartiality of decision-making, as well as the

ability to appeal the decision.

308

Litigants also appreciate and draw value

from feeling that they had at least some opportunity to control the

procedure of the dispute resolution.

309

Providing procedural justice is key to respecting human dignity and to

meeting the requirements of due process.

310

It legitimates legal

procedures and dispute resolution.

311

Litigants who feel that procedures

of a decision were fair are more likely to accept the decision, even if they

306

See Doron Dorfman, Re-Claiming Disability: Identity, Procedural Justice, and the

Disability Determination Process, 42 Law & Soc. Inquiry 195, 204–05 (2017) (“[P]rocedural

justice focuses on how subjects experience the procedure through which decisions regarding

substantive rights are made, rather than its outcomes.”); Victor D. Quintanilla, Taboo

Procedural Tradeoffs: Examining How the Public Experiences Tradeoffs Between Procedural

Justice and Cost, 15 Nev. L.J. 882, 889–92 (2015) (overviewing the importance of procedural

justice); Rebecca Hollander-Blumoff, The Psychology of Procedural Justice in the Federal

Courts, 63 Hastings L.J. 127, 130 (2011) (surveying “the psychology of procedural justice as

it plays out on the ground of federal court litigation”).

307

See Dorfman, supra note 306, at 205 (overviewing procedural justice’s characteristics);

Foohey, supra note 6, at 2313–16 (discussing procedural justice).

308

See Dorfman, supra note 306, at 205 (discussing dignified and respectful treatment);

Steven L. Blader & Tom R. Tyler, A Four-Component Model of Procedural Justice: Defining

the Meaning of a “Fair” Process, 29 Personality & Soc. Psych. Bull. 747, 753 (2003)

(discussing procedures for decision-making and quality of treatment).

309

See Dorfman, supra note 306, at 205 (discussing research about “control over the

procedure and decisions”); E. Allan Lind & Tom R. Tyler, The Social Psychology of

Procedural Justice 97–99 (1988) (noting that litigants value process control even if they

experience negative substantive outcomes).

310

See Quintanilla, supra note 306, at 885 (“[T]he Due Process Clause, properly understood,

is inherently about procedural justice, fairness, and furnishing individuals human dignity.”).

311

See id. at 889 (noting the intersection between procedural justice and legitimacy).

2023] Silencing Litigation Through Bankruptcy 1317

are displeased with the outcome.

312

Overall, research shows that

laypeople “pay a great deal of attention to the way things are done [i.e.,

the way an authority or decision maker comes to a decision] and the

nuances of their treatment by others,”

313

and that when people experience

procedural injustice, public confidence in the legal system deteriorates.

314

Procedures that litigants deem just may result in apologies, a version

of the confrontational justice that opioid claimants chose in the Purdue

Pharma chapter 11 case.

315

Additionally, in pursuing dignity and

vindication for survivors, providing procedural justice increases the

likelihood of exposing the truth about alleged wrongdoings—a process

which corporations and their owners, like the Sacklers, seemingly hope

to bypass via bankruptcy.

316

The initial chapter 11 filings in the wake of mass torts serve as models

for chapter 11 filings of for-profit and nonprofit corporations that deal

with a slew of litigation. But these initial cases had several features that

have fallen to the wayside in recent onslaught litigation bankruptcies,

which has eroded due process and procedural justice in these cases.

B. Harms of Bankrupt Silencing

Although all of the initial mass tort chapter 11 cases were controversial

when filed, the cases seemed to try to follow the Bankruptcy Code’s

vision of “a party-driven, court-supervised process of bargaining over

restructuring that serves multiple purposes.”

317

Corporations dealing with

asbestos faced an unknown number of lawsuits related to a single product,

and the manifestations of the product’s harms had a long tail. If the

corporations addressed each lawsuit or batch of lawsuits as they arose,

there was a troublesome possibility that those people who filed lawsuits

later in time would receive nothing because the corporations had buckled

312

See Dorfman, supra note 306, at 205 (noting the connection between the provision of

procedural justice and deference to legal and governmental institutions).

313

Lind & Tyler, supra note 309, at 242.

314

See Quintanilla & Yontz, supra note 7, at 115–16 (detailing research).

315

Jennifer K. Robbennolt, Apologies and Reasonableness: Some Implications of

Psychology for Torts, 59 DePaul L. Rev. 489, 490–94 (2010) (discussing apologies).

316

See Rachel Bayefsky, Remedies and Respect: Rethinking the Role of Federal Judicial

Relief, 109 Geo. L.J. 1263, 1265 (2021) (noting that civil litigation, in addition to “securing

material benefit[s],” can “also be a way to pursue an interest in something more intangible:

dignity, respect, or vindication”); Matthew A. Shapiro, The Indignities of Civil Litigation, 100

B.U. L. Rev. 501, 514 (2020) (arguing that dignity is provided in civil litigation).

317

Janger, supra note 111, at 373–74.

1318 Virginia Law Review [Vol. 109:1261

under the lawsuits’ weight. Even with the Dalkon Shield and breast

implants, both of which were no longer sold when Robins and Dow

Corning filed bankruptcy, worries about future claimants influenced the

cases.

318

By the time that these corporations filed chapter 11, information about

the hazards of their products was widely known, and during the cases,

more time was provided for discovery and disclosure. For example, in the

Robins case, it took more than a year for the court to collect, review, and

compile evidence for valuing the personal liability claims, in aggregate,

to set the funding of the compensation trust.

319

In addition, the court

appointed an examiner.

320

More importantly, the entire corporation filed

chapter 11, meaning that the Code’s disclosure requirements applied

widely.

321

In addition, the contours of the finalized trusts provided tort claimants

with a process to help prepare their claims and preserved parties’ ability

to litigate individual claims.

322

The non-debtor parties that received

channeling injunctions and releases were enmeshed with the debtor

business. Insurance carriers would pay a portion of the debtor’s liability

inside or outside of bankruptcy. Because of the nature of the alleged

harms, directors and officers likely would be indemnified by the debtor

corporation inside or outside of bankruptcy. Insurance carriers and

directors and officers benefitted from the chapter 11 case because they

too held claims against the debtor and had an interest in seeing the

debtor’s liability fully resolved.

323

The chapter 11 cases boiled down to preserving a business so that

people collectively could receive more money than if they individually or

in batches sued the corporation—a conclusion evident from the cases

themselves, not merely because the corporations stated that they filed

bankruptcy to help survivors receive as much money as possible.

Although not everyone agreed with all of the results, including the amount

318

See Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53 Law & Contemp.

Probs. 79, 101 (1990) (discussing the procedure in Robins for collecting present and future

claims).

319

See id. at 102–03 (detailing the claims estimation process).

320

See supra note 178.

321

See supra Subsection II.C.2.

322

See Georgene M. Vairo, The Dalkon Shield Claimants Trust: Paradigm Lost (or Found)?,

61 Fordham L. Rev. 617, 638–39 (1992) (overviewing the trust); supra notes 179–82 and

accompanying text.

323

See supra Subsection II.C.1.

2023] Silencing Litigation Through Bankruptcy 1319

of funds set aside for tort claimants and the process to access the funds,

the initial mass tort chapter 11 proceedings were about achieving a

productive allocation of resources. Discussions of the filings at the time

even mentioned that choosing bankruptcy might bring more scrutiny and

questions to companies such that the cost-benefit analysis might tip

towards not filing, as one bankruptcy practitioner wrote after the Robins

case concluded: “From the [debtor’s] perspective, there is the risk that the

cloud of uncertainty induced by the bankruptcy process will be more

financially harmful than the cloud of tort liabilities that would exist

outside of the bankruptcy forum.”

324

Headliner chapter 11 filings to contend with onslaught litigation are no

longer primarily about preserving a business or limited to mass tort

product liability situations. The for-profit and nonprofit organizations that

use chapter 11 now are no longer so worried about uncertainty in the

reorganization process or about reputation management because of the

bankruptcy filing. Filing chapter 11 itself has transformed into a

reputation management tool. Corporations do not seek to use bankruptcy

primarily as a remedial scheme focused on monetary recovery. Instead,

through filing, corporations seek a way out of accountability and

litigation. The litigation that organizations seek to deal with in bankruptcy

has shifted from product liability with latent claims to harassment, abuse,

criminal cover-ups, and lies. Even those filings that center on product

liability aim to cabin lawsuits about alleged wrongdoings.

As evidenced by the three case studies, organizations facing onslaught

litigation file bankruptcy with the goal of bypassing litigation procedures

in a few primary, destructive ways. At the onset, the chapter 11 cases

force people to come forward under the auspices of collecting all the

potential claims so that assets and other resources may be allocated fairly.

But with onslaught litigation, this requirement may cut short the time that

people need to be mentally and emotionally prepared to confront abuse,

as in the Archdiocese of Saint Paul & Minneapolis case.

325

Unlike in

product liability mass tort cases, everyone harmed must come forward

essentially immediately because the harms are known to them. If the

bankruptcy court approves the appointment of the equivalent of a future

claims representative, that representative’s power is more limited than in

product liability cases because of the difficulty in predicting the number

324

Feinberg, supra note 318, at 88.

325

See supra notes 223–24 and accompanying text.

1320 Virginia Law Review [Vol. 109:1261

of survivors who will come forward in the future. And while a diocese,

for instance, may face a few hundred plaintiffs, unlike with mass tort

product liability, the number of people potentially harmed rarely reaches

the scope of tens of thousands.

326

The urgency of finding a way to fairly

adjudicate so many lawsuits falls away in the context of some onslaught

litigation.

327

Additionally, even more so than with product liability, this procedure

allows the corporation to more readily assure that discussion of the

wrongdoings will not continue to invade operations. Claims from

harassment, abuse, and other harmful conduct will not mount year after

year, because the chapter 11 case will take care of them all, including

releasing third parties who may have helped cover up the problematic

behavior. TWC’s chapter 11 case was designed, in part, to get releases for

directors and executives, including Robert Weinstein, Harvey

Weinstein’s brother and a company co-founder, who knew about the

abuse.

328

Releasing executives who may have concealed abuse is much

different than releasing executives whose actions likely come under the

purview of director and officer insurance policies.

Simultaneously, the debtor and other parties, such as insurance carriers,

may cast doubt on the validity of claims filed, which further facilitates

reputation management. Most prominently, in the BSA case, insurance

carriers spent months trying to deflect allegations of abuse and blame

attorneys for filing false claims.

329

When BSA filed chapter 11, about 275

326

The BSA chapter 11 case is an exception to this observation. See infra notes 330–32.

327

See Alexandra Lahav, The Case for “Trial by Formula,” 90 Tex. L. Rev. 571, 575–76

(2012) (describing the tension between individual liberty and social welfare with mass torts).

328

Melena Ryzik & Cara Buckley, Harvey Weinstein Accusers Agree to $17 Million

Settlement, N.Y. Times (July 20, 2021), https://www.nytimes.com/2021/01/27/movies/

harvey-weinstein-settlement.html [https://perma.cc/YUP5-W7E7]. See generally Jodi Kantor

& Megan Twohey, She Said: Breaking the Sexual Harassment Story That Helped Ignite a

Movement (2019) (describing the history of abuse and sexual misconduct by Harvey

Weinstein against women).

329

As of the writing of this Article, the insurance carriers’ efforts continue. Chad

Hemenway, Insurers Say ‘Bazooka’ of Bogus Boy Scouts Claims Is Abuse of Bankruptcy

System, Ins. J. (Nov. 10, 2022), https://www.insurancejournal.com/news/national/2022/11/

10/694731.htm [https://perma.cc/WWR5-JS94]; Dietrich Knauth, Boy Scouts Insurers Say

$2.46 Bln Settlement Inflated by Bogus Claims, Reuters (Nov. 8, 2022 1:47 PM),

https://www.reuters.com/legal/litigation/boy-scouts-insurers-say-246-bln-settlement-inflated

-by-bogus-claims-2022-11-08 [https://perma.cc/88SB-PU7V]. On March 28, 2023, the

district court upheld the bankruptcy court’s approval of BSA’s reorganization plan. Vince

Sullivan, Boy Scouts Ch. 11 Plan Upheld On Appeal, Law360 (Mar. 28, 2023, 10:49 AM),

https://www.law360.com/bankruptcy/articles/1590819 [https://perma.cc/B97C-VMPD]. On

2023] Silencing Litigation Through Bankruptcy 1321

lawsuits alleging sexual misconduct were pending and the Boy Scouts

reported knowing of 1,400 other abuse claims.

330

More than 82,000 abuse

claims initially were filed.

331

Although as with large bankruptcy cases, a

portion of the claims were discarded, over 80,000 claims ultimately were

wrapped into the final settlement and reorganization plan.

332

Corporations facing onslaught litigation also now use the chapter 11

process to minimize information discovery and flow. In Bikram and

TWC’s cases, executives ostensibly hoped to reduce how long scandals

remained in the press and social media, while preserving going-concern

value by putting investigations on the proverbial back burner. As noted

by Melissa Jacoby, “TWC’s bankruptcy did not prioritize investigations

of assault and employment discrimination on which it blamed its

bankruptcy. . . . Instead, under the leadership of Robert Weinstein, TWC

went bankrupt to sell itself quickly to a private equity firm.”

333

As detailed above, Purdue Pharma’s bankruptcy case drew even more

intense scrutiny for sidelining attempts at appointing examiners,

squashing “bellwether” litigation, and rushing investigations into the

Sacklers’ ability to contribute to settlements.

334

Indeed, in the broader

context of onslaught litigation, especially when there is some consensus

about the veracity of alleged harms, information management may shift

to containing disclosures about money made and the full extent of funds

available, including those that can be contributed by third parties that seek

March 31, 2023, the non-settling insurers indicated they would appeal that ruling to the Third

Circuit Court of Appeals. Randall Chase, Boy Scouts Bankruptcy Plan Headed to Federal

Appeals Court, AP News (Mar. 31, 2023), https://apnews.com/article/boy-scouts-bankruptcy-

appeals-court-9474baf5ba9628cef13ac4f1ffad0a44 [https://perma.cc/C7RU-X869].

330

Becky Yerak & Soma Biswas, Boy Scouts Draw Plan to Settle with Sex-Abuse Victims,

Exit Bankruptcy. Here’s What We Know., Wall St. J. (Sept. 15, 2021, 4:32 PM),

https://www.wsj.com/articles/the-boy-scouts-bankruptcy-case-what-to-know-11630062000

[https://perma.cc/K7MR-TAAJ].

331

Mike Baker, Sex-Abuse Claims Against Boy Scouts Now Surpass 82,000, N.Y. Times

(May 11, 2021), https://www.nytimes.com/2020/11/15/us/boy-scouts-abuse-claims-bankrupt

cy.html [https://perma.cc/2LZL-ZDVV].

332

Lauren del Valle, Judge Grants Final Approval of Boy Scouts of America Reorganization

Plan to Pay More than $2.4 Billion in Sex Abuse Claims, CNN (Sept. 9, 2022, 10:03 PM),

https://www.cnn.com/2022/09/09/us/boy-scouts-of-america-bankruptcy-judge-final-

approval/index.html [https://perma.cc/A8XZ-8L9N].

333

Jacoby, Unbundling Business Bankruptcy Law, supra note 90, at 1718–19, 1728 (noting

that TWC entered chapter 11 with a deal to sell itself to Lantern Capital); see also Jacoby,

Sorting Bugs and Features, supra note 24 (manuscript at 15) (discussing transparency rules

and norms).

334

See supra Section III.B; Lipson, Remedial Schemes, supra note 25, at 1795–96 (detailing

“structural conflicts” among estate fiduciaries in the Purdue Pharma case).

1322 Virginia Law Review [Vol. 109:1261

channeling injunctions and releases. This leveraging of the reorganization

process focuses less on forcing everyone to come forward immediately,

and more on litigation management, such that the lawsuits are resolved

swiftly and relatively quietly.

This aspect of silencing is apparent in J&J’s and 3M’s chapter 11

filings of subsidiaries.

335

By segregating the problematic lawsuits into a

portion of the entire corporate family, J&J and 3M seek to expedite the

process—the smaller the debtor, the fewer the disclosures and the more

contained the settlement and reorganization plan.

336

These cases show

that some judges are catching on to this tactic. In the case involving Aearo

Technologies, the subsidiary that 3M placed in chapter 11, Bankruptcy

Judge Jeffrey J. Graham declined to extend the automatic stay to pending

litigation regarding allegedly defective earplugs against 3M.

337

Judge

Graham subsequently dismissed the chapter 11 case for lack of a “valid

reorganization purpose.”

338

Relatedly, in 3M’s pending multidistrict

litigation, the federal district court judge stated that 3M has full potential

liability and called out the corporation’s “brazen abuse of the litigation

process.”

339

And the Third Circuit booted J&J’s subsidiary, LTL, out of

chapter 11.

340

Along with this expedited process, in the most recent onslaught

litigation bankruptcies, the debtor demands that all (or nearly all) would-

be plaintiffs agree to the settlement, further supporting the resolution of

all discussions of the wrongdoings. Purdue Pharma again illustrates

debtors’ calls for the complete resolution of litigation.

341

It also shows

335

See supra note 23.

336

See Casey & Macey, supra note 298, at 977 (describing this as allowing “a firm to

quarantine mass tort liabilities from operations facilitating resolution in a single, streamlined

bankruptcy proceeding”).

337

In re Aearo Techs. LLC, 642 B.R. 891, 896 (Bankr. S.D. Ind. 2022); 3M Combat Earplug

Lawsuits to Proceed, Judge Rules, Despite Bankruptcy Case, Reuters (Aug. 26, 2022,

9:24 PM), https://www.reuters.com/markets/us/3m-subsidiarys-bankruptcy-fails-stop-comba

t-earplug-lawsuits-2022-08-26 [https://perma.cc/GME4-7UK8].

338

In re Aearo Techs. LLC, No. 22-bk-02890, 2023 WL 3938436, at *38 (Bankr. S.D. Ind.

June 9, 2023), ECF No. 1744.

339

Martina Barash, 3M Combat Earplug Judge Blocks Bid to Shift Blame to Aearo Unit,

Bloomberg L. (Dec. 22, 2022, 4:58 PM), https://news.bloomberglaw.com/litigation/3m-

combat-earplug-judge-blocks-bid-to-shift-blame-to-aearo-unit [https://perma.cc/W8GG-TJ

TP].

340

See supra note 272 and accompanying text. This did not prevent LTL from filing chapter

11 again; this second chapter 11 case is pending at the time of this Article’s drafting. See supra

note 23.

341

See supra Section III.B.

2023] Silencing Litigation Through Bankruptcy 1323

how the Code’s provisions regarding voting on reorganization plans can

be followed such that plans are approved, but relatively few tort claimants

actually vote. In Purdue Pharma, the nearly 60,000 personal injury

claimants who cast votes overwhelmingly approved of the plan, but

almost 69,000 claimants did not cast votes.

342

Alex Jones and Infowars’s

case likewise follows the pattern of seeking a swift resolution of litigation,

even if that litigation is in its final stages.

When collected, these tactics squash people’s voices, deny them a

sense of control over the resolution process for the harms they allege have

been perpetrated against them, and largely ensure that they will feel

disrespected. They violate the basics of procedural justice. People are less

likely to accept the reorganizations’ outcomes and are more likely to

question the integrity of the business bankruptcy and civil justice systems.

The tactics further serve to harm the public’s view of the likelihood that

corporations will have to answer for their actions. Each successive

corporation that files chapter 11 to deal with onslaught litigation

contributes to a growing collective disillusion with the economy and

businesses. Yet specific corporations (and their owners) still may achieve

what they desire—to limit future discussions of their wrongdoings so they

can get back to their business freed from negative press and from

accountability.

In recent onslaught litigation bankruptcy filings, all of the corporate

debtors and their executives justify the filings with language about

ensuring that all people who allege harms are treated fairly and even-

handedly and with calls for expediting the process to save resources such

that people can recover as much as possible on account of the

wrongdoings. But mass tort bankruptcies of the past have provided tort

plaintiffs with more voice during the chapter 11 proceedings via

discovery and negotiations, at least partially preserved plaintiffs’ ability

to choose among remedies, and given far fewer third-party releases.

That the most recent onslaught litigation chapter 11 filings amount to

a severe stretching of the relief previously afforded has not gone

unnoticed by the public, litigants, and some bankruptcy and appellate

courts. There has been push back against third-party releases

342

See Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 12–14) (discussing

how assigning the same voting power to all tort claimants’ claims dilutes the power of those

people with higher value claims); Lipson, Remedial Schemes, supra note 25, at 1791–92

(overviewing how voting was constrained in Purdue Pharma).

1324 Virginia Law Review [Vol. 109:1261

(successfully in a diocese’s case)

343

and expedited timelines, requests for

more examination, and calls for tort claimants to have more say during

negotiations and the ability to detach individual claims from global

settlements.

344

But it should not be largely the work of tort claimants (that

is, survivors) to fight against corporations’ attempts to force people to

come forward and to control the flow of information by leveraging

bankruptcy. And tort claimants should not have to wait months or years

for objections to corporations’ “brazen abuse” of chapter 11 to work their

way through appeals before claimants are freed from bankruptcy’s

hold.

345

There are ways to protect survivors’ voices and the justice

system’s integrity by limiting chapter 11 filings and by imposing stricter

requirements for corporations to remain in bankruptcy—many of which

can draw from the lessons of recent onslaught litigation bankruptcies. The

next Part details those solutions.

V. E

NSURING VOICE IN BANKRUPTCY

Chapter 11 reorganization was not built with onslaught litigation in

mind. The calls for proceeding with caution in the wake of the asbestos

cases have gone unheeded and largely forgotten.

346

To rein in this use of

chapter 11, we propose that when faced with a bankruptcy filing related

to onslaught litigation, it should be presumed that the filing was not made

in good faith and should be dismissed. Instead of other parties, such as

survivors, having to assert bad faith, the debtor business should have to

343

See supra notes 236–37 and accompanying text.

344

In Hertz’s chapter 11 case, Judge Mary Walrath ruled that people who accused Hertz of

false arrest could sue outside of bankruptcy court. In re Rental Car Intermediate Holdings,

LLC, No. 20-bk-11247, slip op. at 15 (Bankr. D. Del. July 14, 2022); Steven Church, Hertz

False-Arrest Claimants Allowed to Sue in State Court, Bloomberg (Oct. 11, 2022, 3:47 PM),

https://www.bloomberg.com/news/articles/2022-10-10/hertz-false-arrest-claimants-can-sue-

in-state-court-judge-rules [https://perma.cc/C425-ZVXX]. But see James Nani, Bankrupt

Long Island Diocese Urged to Mediate to Avoid ‘Abyss,’ Bloomberg L. (Feb. 21, 2023,

4:22 PM), https://news.bloomberglaw.com/bankruptcy-law/bankrupt-long-island-diocese-

urged-to-mediate-to-avoid-abyss [https://perma.cc/Q59X-W7MG] (reporting on how the

bankruptcy judge in Catholic Diocese of Rockville Centre’s case pushed survivors and the

diocese to negotiate when their requested settlement amounts were $140 million apart).

345

Barash, supra note 339. It took over fifteen months, from October 14, 2021, to January

30, 2023, for LTL’s filing to be dismissed. In re LTL Mgmt., LLC, 64 F.4th 84, 97 (3d Cir.

2023).

346

See supra notes 200–01 and accompanying text.

2023] Silencing Litigation Through Bankruptcy 1325

prove good faith, based on the criteria courts have used to determine that

businesses are abusing bankruptcy.

347

For those organizations that put forth legitimate reasons for using

chapter 11, the bankruptcy court must put in place protective measures to

guard against the diminishment of people’s voices and to ensure public

accountability. Although these measures will require longer and

potentially more costly cases, the time and expense are necessary to

preserve procedural justice, due process, and the integrity of the

bankruptcy system. If a debtor business refuses to follow these measures,

the case should be dismissed as not being brought in good faith. The most

important of these measures are overviewed in the remainder of this Part.

Admission of Responsibility. The defendant must admit liability for the

acts that it allegedly committed.

348

With onslaught litigation, alleged

wrongful actions implicate tortious or abusive conduct and have the

ability to affect financial or operational stability. If an organization seeks

to use bankruptcy to process and truncate the resolution of these claims,

it must not wholly dispute its culpability. Relatedly, the corporate

defendant must issue a public statement of responsibility attesting to the

role it played in the harm, and the statement must be released such that it

is reasonably likely to be noticed by the public.

No Preliminary Injunctions for Third Parties. If a corporate defendant

seeks to use chapter 11 for onslaught litigation, bankruptcy courts should

not use their equitable power to extend preliminary injunctions to third

parties who are not the debtor.

349

If third parties—such as individuals,

347

11 U.S.C. § 1112(b); see In re Nat’l Rifle Ass’n of Am., 628 B.R. 262, 281 (Bankr. N.D.

Tex. 2021) (“[T]he Court believes the NRA’s purpose in filing bankruptcy is less like a

traditional bankruptcy case in which a debtor is faced with financial difficulties or a judgment

that it cannot satisfy and more like cases in which courts have found bankruptcy was filed to

gain an unfair advantage in litigation or to avoid a regulatory scheme.”). This is a version of

the NBRC’s premise that mass tort litigation be mature and enterprise threatening. Nat’l

Bankr. Rev. Comm’n, supra note 200, at 327–28.

348

See Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 7) (noting that the

NBRC “doubted a mass future claims bankruptcy should proceed if the debtor enterprise

disclaimed all responsibility”). If a defendant wishes to adjudicate liability, it should not be

allowed to use bankruptcy to do that. This will disaggregate the liquidation of claims from

ability to pay. See Lipson, The Rule of the Deal, supra note 9, at 44 (arguing that “rule of law”

questions, such as determining liability in the first instance, do not belong in bankruptcy

court). Even if the debtor does admit liability, bankruptcy judges should consider lifting the

automatic stay to allow suits in other courts to go forward, thereby allowing other courts to

adjudicate the contours of liability—as Judge Walrath did in Hertz’s chapter 11 case. See

supra note 344.

349

See supra notes 124–25 and accompanying text.

1326 Virginia Law Review [Vol. 109:1261

related corporate entities, insurers, or suppliers—want to pause litigation

against them during the corporate defendant’s chapter 11 case, they will

have to file bankruptcy themselves. They thus will have to meet the

Code’s requirements, including disclosure requirements. This will

increase information flow. If the costs of bankruptcy outweigh its

benefits, these third parties will not file. While the corporate defendant’s

chapter 11 case is pending, the benefits of chapter 11 will be limited to

the defendant debtor.

350

No Third-Party Releases and Channeling Injunctions. Relatedly, with

the exception of cases filed to deal with asbestos, bankruptcy courts

should not use their equitable power to grant third parties releases and

channel claims against third parties to trusts in chapter 11 cases filed to

address onslaught litigation.

351

If third parties want to use bankruptcy to

resolve related litigation, they will have to file chapter 11 themselves. The

discharge of the onslaught litigation indebtedness will be limited to only

defendant debtors.

352

Presumptive Examiner Appointment. The Code provides that in certain

circumstances, if an examiner is requested in a chapter 11 case, the court

must appoint such an individual.

353

However, in prior mass tort chapter

11 proceedings, such as Purdue Pharma’s case, bankruptcy judges have

declined to appoint an examiner when requested.

354

In onslaught litigation

350

Alternatively, there must be a threshold determination that a third party’s participation

in the chapter 11 case is necessary such that the third party’s decision not to file chapter 11

itself would be significantly value destroying—for example, to prevent dissipation of assets.

We view this as an inferior alternative for promoting voice and accountability, and that it

should not be coupled with allowing third-party releases and channeling injunctions.

Nonetheless, if so, these third parties must be subject to reporting requirements akin to the

level of financial reporting they would be subject to if they had filed bankruptcy themselves.

351

11 U.S.C. § 524(g); see also supra notes 119–35 and accompanying text.

352

Alternatively, only consensual third-party releases and channeling injunctions should be

allowed. This recommendation pairs with allowing claimants to opt-out of the chapter 11

scheme for the adjudication of their individual claims. We view this as an inferior alternative

for promoting voice and accountability. If third-party releases and channeling injunctions are

allowed at all, there must be the ability, clearly communicated to claimants, that they can opt-

out of the chapter 11 case entirely and the third parties must be subject to reporting

requirements akin to the level of financial reporting they would be subject to if they had filed

bankruptcy themselves. The reporting requirements envisioned go beyond those proposed by

other scholars. Casey & Macey, supra note 298, at 978 (recommending that courts be

“aggressive in demanding disclosures” about finances and fraudulent transfers); Simon,

Bankruptcy Grifters, supra note 24, at 1205–10 (proposing more disclosures).

353

11 U.S.C. § 1104(c).

354

See Lipson, The Rule of the Deal, supra note 9, at 75–76 (“An examiner was proposed

early in Purdue Pharma. Many personal injury victims apparently wanted one. But Judge

2023] Silencing Litigation Through Bankruptcy 1327

chapter 11 cases, examiner appointment should be presumptive.

355

The

burden of proof should be on the defendant debtor to show why an

examiner is not needed.

Multiple Claims Representatives. Onslaught litigation typically

involves hundreds, thousands, or tens of thousands of tort survivors who

become claimants when a corporate defendant files chapter 11. Some

claimants have already come forward, some will come forward, some

may not be ready to come forward, and some may not know they need to

come forward because their injuries remain latent. These claimants, even

those who have come forward, often hold claims legally distinct from

each other. But debtors lump all claimants together, including in weighing

votes, resulting in the appointment of one committee to represent current

claimants and one future claims representative. Litigation claimants in

these chapter 11 cases are not that monolithic and the lack of

representation dilutes their voices. Indeed, in writing about mass tort

bankruptcies, in her 2000 book published with the Federal Judicial

Center, Elizabeth Gibson identified concerns about placing current

claimants in a single class in reorganization plans and the use of a single

future claims representative.

356

Going forward, judges overseeing chapter 11 cases dealing with

onslaught litigation must consider appointing multiple future claim

representatives and how current claimants’ interests are represented by

committees and in voting procedures.

357

To facilitate this consideration,

the debtor defendant should submit detailed information about the range

of claims, types of defenses, and timelines for latency. With this

information, bankruptcy judges, with the help of the United States Trustee

can assess how to ensure that the claimants covered by a representative or

by a committee have similar interests, removing the tension among

Drain forcefully rejected these suggestions.”). Judge Drain eventually appointed an examiner.

Maria Chutchian, Purdue Pharma Bankruptcy Judge OKs Examiner But Condemns Sackler-

related Attacks, Reuters (June 16, 2021, 6:52 PM), https://www.reuters.com/legal/transaction

al/purdue-pharma-bankruptcy-judge-oks-examiner-condemns-sackler-related-attacks-2021-0

6-16/ [https://perma.cc/82RV-X2PX].

355

For this recommendation to comply with the text of 11 U.S.C. § 1104(c), the Office of

United States Trustee should be prepared to immediately request an examiner in onslaught

litigation chapter 11 cases.

356

Gibson, Case Studies, supra note 201, at 14–15, 18–22; see also Gibson, A Response to

Professor Resnick, supra note 201, at 2106–16 (discussing claimants).

357

See Jacoby, Sorting Bugs and Features, supra note 24 (manuscript at 14–15) (discussing

how the best interests of creditors test is affected by claims estimation).

1328 Virginia Law Review [Vol. 109:1261

constituents that committees and future claims representatives currently

face.

358

Ability to Opt-Out. Claimants, including future claimants, must have

the ability to opt-out of the chapter 11 scheme for purposes of raising their

injury outside bankruptcy. Stated differently, plaintiffs will maintain the

ability to litigate their claims in district court even if the bankruptcy

process is administering the claims of some other would-be plaintiffs.

Similarly, if a plaintiff decides to have their claim adjudicated via the

chapter 11 process, they must maintain the ability to opt-out of any

settlements within the bankruptcy, such as those rolled into reorganization

plans. Although this requirement may seem to destroy bankruptcy’s

collective nature, if claimants receive more information and protections

during the process, such as through disclosures, examiners, and

representatives, their willingness to agree to submit to the settlement

process and reorganization plan vote should increase such that few (if any,

depending on the number of litigation claimants) opt out.

For those claimants who agree to the settlement in bankruptcy, they too

must have options for adjudicating their individual claims through the

resulting trust. As a baseline, a claimant can choose to accept the amount

of recovery as formulated by the settlement terms. But they must be

afforded an avenue to dispute the recovery amount—essentially to litigate

with the trust administrator the value of their claim. And claimants must

have the option to make public the result of that determination. So-called

secret side-settlements should be prohibited. Preventing information

about the dispute and the settlement from being sealed allows information

to make its way to other claimants and to the broader public. In addition,

if a claimant disputes their claim value as set by the trust administrator,

they must have an avenue to appeal to an Article III judge.

359

Cutting Off Ancillary Maneuvers. Finally, the chapter 11 filings of J&J

and 3M subsidiaries highlight how corporate defendants currently can

engage in venue and judge shopping and use loopholes in fraudulent

transfer law to effectuate the so-called Texas Two-Step in particular

358

See Gibson, A Response to Professor Resnick, supra note 201, at 2106–16 (discussing

current and future claimants); Casey & Macey, supra note 298, at 1018 (posing “appointing

independent board members whose job is to represent tort claimants” as a more radical

proposal).

359

This ability to opt-out will be bolstered by ensuring that the trust reconciliation process

is designed with affording claimants with procedural justice in mind. This should increase

claimants’ willingness to agree to submit to the settlement process and reorganization plan

vote.

2023] Silencing Litigation Through Bankruptcy 1329

bankruptcy courts.

360

The ability to forum shop in these ways must be

eliminated, which will require legislative action. Enactment of the

Bankruptcy Venue Reform Act of 2021 will end venue and judge

shopping by amending bankruptcy’s venue provisions to provide that

large companies and wealthy individuals must file in either their home

states (where their principal place of business is located) or where their

significant assets are located.

361

If enacted, corporate defendants seeking

the benefits of bankruptcy will be unable to “run across the country” and

“cherry-pick[] courts that they think will rule in their favor.”

362

The Texas Two-Step is a controversial process under which certain

state corporate laws, including that of Texas, allow a corporation created

under that state law to divide itself into two separate corporate entities.

One entity receives select liabilities, leaving the other free of those legal

obligations. The liability-laden entity files chapter 11. The other entity

proceeds with business as usual, without the need to file bankruptcy.

363

To prevent these transactional abuses, bankruptcy courts should deem the

corporate divisions and segregation of assets to only one of the surviving

companies as fraudulent transfers, which should force all corporate

entities to enter chapter 11 to deal with onslaught litigation.

Collectively, for those organizations that seek to reorganize to deal

with onslaught litigation, and which survive the initial inquiry into the

reasons for their invocation of the chapter 11 process, these measures will

realign the balance of power between tort claimants, debtor businesses,

and other parties, and safeguard against the concealment of information.

If an organization that files chapter 11 in the wake of onslaught litigation

360

See Levitin, Purdue’s Poison Pill, supra note 24, at 1128–31 (discussing venue

shopping); Levitin, The Texas Two-Step, supra note 24 (discussing how J&J used this

process).

361

Bankruptcy Venue Reform Act, S. 2827, 117th Cong. (2021) (codified as amended at 28

U.S.C. § 1408); Warren, Cornyn Introduce Bill to Prevent Large Corporations From ‘Forum-

Shopping’ in Bankruptcy Cases, Elizabeth Warren (Sept. 23, 2021), https://www.warren.sena

te.gov/newsroom/press-releases/warren-cornyn-introduce-bill-to-prevent-large-corporations-

from-forum-shopping-in-bankruptcy-cases [https://perma.cc/JCL9-DZN8].

362

Maria Chutchian, Warren, Cornyn Introduce Bill to Block Judge-Shopping in

Bankruptcy, Reuters (Sept. 23, 2021, 4:56 PM), https://www.reuters.com/legal/transactional/

warren-cornyn-introduce-bill-block-judge-shopping-bankruptcy-2021-09-23

[https://perma.cc/7Y6E-2V8C].

363

See Levitin, The Texas Two-Step, supra note 24 (discussing this process); Samantha

Goldstein, The Texas Two-Step: A Controversial Bankruptcy Dance, U. Miami L. Rev. News

(May 3, 2022), https://lawreview.law.miami.edu/the-texas-two-step-a-controversial-bankrupt

cy-dance [https://perma.cc/KP7T-AQ82] (same).

1330 Virginia Law Review [Vol. 109:1261

refuses to agree to these protections, it should not be allowed to resolve

the litigation through bankruptcy.

ONCLUSION

Scott Hershovitz has warned that tort theory tends to neglect the

procedural dimensions of tort law, thereby overlooking how justice is

administered (or not) between survivors and wrongdoers.

364

For-profit

and nonprofit organizations have learned how to move onslaught

litigation to the bankruptcy system, in part to similarly shift away from

the procedural justice and due process that the civil litigation system

affords plaintiffs. As Alexandra Lahav has written, the idea “that every

person should be entitled to [their] day in court” lies “at the heart of the

[American] legal system.”

365

By funneling onslaught litigation into

bankruptcy, corporate defendants use chapter 11 to deny people the ability

to participate in the justice process and to hurriedly shut down the truth

telling and concomitant public airing that can come from that process.

This Article shows how the reorganization process has been twisted to

resolve onslaught litigation such that now its use is largely inappropriate.

With the understanding that some businesses will have legitimate reasons

to file chapter 11 when facing onslaught litigation, it offers a narrow path

for resolving these disputes in chapter 11 through the implementation of

necessary guardrails and assurances that those harmed will maintain their

voice.

364

Scott Hershovitz, Harry Potter and the Trouble with Tort Theory, 63 Stan. L. Rev. 67,

68–69 (2010).

365

Alexandra Lahav, In Praise of Litigation, 112, 114 (2017). See generally Maya Steinitz,

The Case for an International Court of Civil Justice (2019) (detailing the access to justice and

day in court virtues of the civil justice system, including in mass tort cases).