Possible Fraudulent Conveyances and Corporate Transactions After Alleged Mass Torts – New Comp
After an alleged or actual mass tort, some companies move voluntarily into chapter 11 proceedings to cope with the claims. However, some seek to salvage value via other paths, such as a move to new ownership through a sale or other corporate transaction. The decision-making process between the two paths (or other paths) may become more difficult as social media events foster fast and furious sets of allegations and claims, and lawsuits sometimes follow in short order.
The difficulties are exemplified by a lawsuit filed on Sunday February 11, 2018 by the New York Attorney General to – apparently – stymie or alter the course of an apparently imminent sale of Weinstein entities. Those entities have been much in the news due to claims of sexual discrimination by Harvey Weinstein, and alleged lack of action by the Board of Directors despite alleged knowledge of various claims and confidential settlements. The lawsuit alleges numerous acts of potentially compensable discrimination, and seeks to stymie a possible or actual fraudulent conveyance of assets that could thwart the collection of judgments by tort claimants. Specifically, the closing prayer for relief (at page 37, subparagraph 4) seeks, among other things, an order:
“prohibiting any corporate or financial transaction that would enable Respondents to evade the continued jurisdiction of the Attorney General and this Court, undermine compliance with the terms of any judgment, or conceal proceeds of any sale of TWC or any of its assets;”
The Weinstein case of course is not a typical mass tort in the sense that it involves alleged discrimination instead of sales of allegedly harmful products or pollution of water, ground or air. However, there is no obvious reason why an AG might not take the same action regarding a sale or other transfer of assets involving a company facing pending or threatened claims arising from allegedly defective products or pollution of water, ground or air.
For more specifics about the suit, see the AG’s press release here, and/or the complaint, here. The proposed sale collapsed after the suit was filed, according to a February 11, 2018 WSJ article.