Mass Exploitation

15 Pages Posted: 28 Sep 2021 Last revised: 9 Nov 2021

See all articles by Samir D. Parikh

Samir D. Parikh

Lewis & Clark Law School; Fulbright Schuman Scholar; Bloomberg Law; Fulbright Commission

Date Written: September 23, 2021

Abstract

Modern mass tort defendants – including Johnson & Johnson, Purdue Pharma, USA Gymnastics, and Boy Scouts of America – have developed unprecedented techniques for resolving mass tort cases; innovation coupled with exploitation. Three weapons in this new arsenal are particularly noteworthy. Before a filing, divisive mergers allow corporate defendants to access bankruptcy on their terms. Once in bankruptcy, these mass restructuring debtors curate advantageous provisions in the Bankruptcy Code to craft their own ad hoc resolution mechanism implemented through plans of reorganization. This maneuver facilitates questionable outcomes, including the third-party releases the Sackler family recently secured. Finally, in order to minimize its financial contribution to a victims’ settlement trust, a mass restructuring debtor can agree to convert its tainted business into a public benefit company after bankruptcy and devote future profits – no matter how speculative they may be – to victims.

The net effect of these legal innovations is difficult to assess because the intricacies are not fully understood. Debtors argue that these resolution devices provide accelerated and amplified distributions. And forum shopping has landed cases before accommodating jurists willing to tolerate unorthodoxy. The fear, however, is that mass tort victims are being exploited. The aggregation of these maneuvers may allow culpable parties to sequester funds outside of the bankruptcy court’s purview and then rely on statutory loopholes to suppress victim recoveries. Mass restructuring debtors are also pursuing victim balkanization – an attempt to pit current victims against future victims in order to facilitate settlements that may actually create disparate treatment across victim classes.

This Essay is the first to identify and assess the new shadowed practices in mass restructuring cases, providing perspective on interdisciplinary dynamics that have eluded academics and policymakers. This is one of the most controversial legal issues in the country today, but there is scant scholarship exploring improvement of the flawed machinery. This Essay seeks to create a dialogue to explore whether a legislative or judicial response is necessary and what shape such a response could take.

Keywords: Mass torts, Texas Two Step, multidistrict litigation, divisive mergers, class actions, bankruptcy, civil procedure, torts, public benefit companies, corporate restructurings, Johnson and Johnson, Purdue Pharma, Takata, Boy Scouts of America, USA Gymnastics, Imerys

Suggested Citation

Parikh, Samir D., Mass Exploitation (September 23, 2021). University of Pennsylvania Law Review Online, Vol. 170, 2021, Available at SSRN: https://ssrn.com/abstract=3929647 or http://dx.doi.org/10.2139/ssrn.3929647

Samir D. Parikh (Contact Author)

Lewis & Clark Law School ( email )

10015 S.W. Terwilliger Blvd.
Portland, OR 97219
United States

Fulbright Schuman Scholar ( email )

United States

Bloomberg Law ( email )

New York
New York, NY
United States

Fulbright Commission ( email )

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