The House Judiciary Committee voted in favor of a bill to overhaul the corporate bankruptcy system following public outcry over the Purdue Pharma LP and Johnson & Johnson cases.
The committee approved the Non-Debtors Discharge Prohibition Act (HR 4777) on a 23-17 vote Wednesday, sending the bill to the House. All Republicans on the committee voted against the Democrat-backed measure, with one abstention.
An accompanying invoice (Art. 2497) was introduced to the Senate by Senator Elizabeth Warren (D-Mass.).
Representative Jerrold Nadler (DN.Y.) introduced HR 4777 just weeks before a New York bankruptcy judge approved Purdue’s Chapter 11 plan, which freed company owners, family Sackler, of any future opioid litigation.
The bill, which has the backing of several consumer groups, would in future ban similar non-consensual discharge provisions for non-debtors in New Mexico Bankruptcy business.
“The bankruptcy system is supposed to work for everyone, but in many cases it only works for the powerful and all too often it works best for big companies and the very rich who haven’t even filed for bankruptcy. balance sheet but figured out how to tweak the system to get blanket immunity for their wrongdoing, ”Nadler said Wednesday.
The legislation would also ban “two-stage Texas,” a maneuver that allows large corporations reincorporating in Texas to split up a branch, transfer massive tort liability to that branch, and then bankrupt the unit.
Johnson & Johnson is the latest company to use the divisive merger process, handling thousands of asbestos exposure claims through the bankruptcy of its newly formed subsidiary LTL Management LLC.
“This is not what the bankruptcy law was intended for,” Rep. Steve Cohen (D-Tenn.) Said during the markup, targeting J&J legal maneuvers. “They knew what they were doing and now they have to pay for it.”
HR 4777 would also limit the length of time that litigation can be stayed against affiliates that are not bankrupt to 90 days.
Republicans on the committee decried the bill for seeking to drastically change the bankruptcy code in response to alleged abuses in a small handful of cases.
“Ultimately, while parts of this bill may be well-intentioned, it will likely have unintended consequences that could be detrimental to all parties involved in many bankruptcy proceedings,” Rep. Scott Fitzgerald said ( R-Wis.) Mentioned.