[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                   OVERSIGHT OF THE BANKRUPTCY CODE,
                   PART 1: CONFRONTING ABUSES OF THE
                           CHAPTER 11 SYSTEM

=======================================================================

                                HEARING

                               BEFORE THE

     SUBCOMMITTEE ON ANTITRUST, COMMERCIAL, AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        WEDNESDAY, JULY 28, 2021

                               __________

                           Serial No. 117-38

                               __________

         Printed for the use of the Committee on the Judiciary
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


               Available via: http://judiciary.house.gov
               
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-645                       WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   
              
                       COMMITTEE ON THE JUDICIARY

                    JERROLD NADLER, New York, Chair
                MADELEINE DEAN, Pennsylvania, Vice-Chair

ZOE LOFGREN, California              JIM JORDAN, Ohio, Ranking Member 
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
STEVE COHEN, Tennessee               LOUIE GOHMERT, Texas
HENRY C. ``HANK'' JOHNSON, Jr.,      DARREL ISSA, California
    Georgia                          KEN BUCK, Colorado
THEODORE E. DEUTCH, Florida          MATT GAETZ, Florida
KAREN BASS, California               MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         ANDY BIGGS, Arizona
DAVID N. CICILLINE, Rhode Island     TOM McCLINTOCK, California
ERIC SWALWELL, California            W. GREGORY STEUBE, Florida
TED LIEU, California                 TOM TIFFANY, Wisconsin
JAMIE RASKIN, Maryland               THOMAS MASSIE, Kentucky
PRAMILA JAYAPAL, Washington          CHIP ROY, Texas
VAL BUTLER DEMINGS, Florida          DAN BISHOP, North Carolina
J. LUIS CORREA, California           MICHELLE FISCHBACH, Minnesota
MARY GAY SCANLON, Pennsylvania,      VICTORIA SPARTZ, Indiana
SYLVIA R. GARCIA, Texas              SCOTT FITZGERALD, Wisconsin
JOE NEGUSE, Colorado                 CLIFF BENTZ, Oregon
LUCY McBATH, Georgia                 BURGESS OWENS, Utah
GREG STANTON, Arizona
VERONICA ESCOBAR, Texas
MONDAIRE JONES, New York
DEBORAH ROSS, North Carolina
CORI BUSH, Missouri

        PERRY APELBAUM, Majority Staff Director & Chief Counsel
               CHRISTOPHER HIXON, Minority Staff Director
                               
                               ------                                

                 SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
                         AND ADMINISTRATIVE LAW

                DAVID N. CICILLINE, Rhode Island, Chair
                PRAMILIA JAYAPAL, Washington, Vice-Chair

JOE NEGUSE, Colorado                 KEN BUCK, Colorado, Ranking Member
ERIC SWALWELL, California            DARREL ISSA, California
MONDAIRE JONES, New York             MATT GAETZ, Florida
THEODORE E. DEUTCH, Florida          MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         W. GREGORY STEUBE, Florida
JAMIE RASKIN, Maryland               MICHELLE FISCHBACH, Minnesota
VAL BUTLER DEMINGS, Florida          VICTORIA SPARTZ, Indiana
MARY GAY SCANLON, Pennsylvania       SCOTT FITZGERALD, Wisconsin
LUCY McBATH, Georgia                 CLIFF BENTZ, Oregon
MADELINE DEAN, Pennsylvania          BURGESS OWENS, Utah
HENRY C. ``HANK'' JOHNSON, Jr., 
    Georgia

                       SLADE BOND, Chief Counsel
                      DOUG GEHO, Minority Counsel
                            
                            C O N T E N T S

                              ----------                              

                        Wednesday, July 28, 2021

                                                                   Page

                           OPENING STATEMENTS

The Honorable David N. Cicilline, Chair of the Subcommittee on 
  Antitrust, Commercial and Administrative Law from the State of 
  Rhode Island...................................................     2
The Honorable Ken Buck, Ranking Member of the Subcommittee on 
  Antitrust, Commercial and Administrative Law from the State of 
  Colorado.......................................................     3
The Honorable Jerrold Nadler, Chair of the Committee on the 
  Judiciary from the State of New York...........................   173

                               WITNESSES

The Honorable William Tong, Attorney General, State of 
  Connecticut
  Oral Testimony.................................................     6
  Prepared Testimony.............................................     8
Tasha Schwikert Moser, Bronze Medal Olympic Gymnast, Attorney, 
  Sex Abuse Survivor
  Oral Testimony.................................................    12
  Prepared Testimony.............................................    14
Alexis Pleus, Founder, Executive Director, Board Ex Officio 
  Chair, Truth Pharm
  Oral Testimony.................................................    18
  Prepared Testimony.............................................    20
  Supplement Material............................................    28
Adam J. Levitin, Anne Fleming Research Professor and Professor of 
  Law, Georgetown Law
  Oral Testimony.................................................   128
  Prepared Testimony.............................................   130
Douglas G. Baird, Chair, National Bankruptcy Conference; Harry A. 
  Bigelow Distinguished Service Professor of Law, University of 
  Chicago Law School
  Oral Testimony.................................................   152
  Prepared Testimony.............................................   154
David A. Skeel, Jr., S. Samuel Arsht Professor of Corporate Law, 
  University of Pennsylvania Law School
  Oral Testimony.................................................   164
  Prepared Testimony.............................................   166

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Materials submitted by the Honorable David N. Cicilline, Chair of 
  the Subcommittee on Antitrust, Commercial and Administrative 
  Law from the State of Rhode Island, for the record
  Statement from Marci A. Hamilton, Founder and CEO, CHILD USA...   200
  Statement from Olympian Terin Humphrey, CHILD USA..............   205

                                APPENDIX

An article entitled, ``Bankruptcy as Bailout: Coal Company 
  Insolvency and the Erosion of Federal Law,'' Stanford Law 
  Review, submitted by the Honorable Mary Gay Scanlon, a Member 
  of the Subcommittee on Antitrust, Commercial and Administrative 
  Law from the State of Pennsylvania, for the record.............   210

 
                   OVERSIGHT OF THE BANKRUPTCY CODE,
          PART 1: CONFRONTING ABUSES OF THE CHAPTER 11 SYSTEM

                              ----------                              


                        Wednesday, July 28, 2021

                        House of Representatives

               Subcommittee on Antitrust, Commercial, and

                           Administrative Law

                       Committee on the Judiciary

                             Washington, DC

    The Committee met, pursuant to call, at 10:05 a.m., in room 
2141, Rayburn House Office Building, Hon. David N. Cicilline 
[Chair of the Subcommittee] presiding.
    Members present: Representatives Nadler, Cicilline, Jones, 
Raskin, Jayapal, Scanlon, McBath, Dean, Johnson of Georgia, 
Buck, Johnson of Louisiana, Steube, Bishop, Fischbach, Spartz, 
Fitzgerald, Bentz, and Owens.
    Staff present: John Doty, Senior Advisor; Moh Sharma, 
Director of Member Services and Policy and Outreach Advisor; 
Cierra Fontenot, Chief Clerk; John Williams, Parliamentarian 
and Senior Counsel; Atarah McCoy, Staff Assistant; Daniel 
Rubin, Communications Director; Merrick Nelson, Digital 
Director; Kayla Hamedi, Deputy Communications Director; Joseph 
Van Wye, Professional Staff Member/Legislative Aide for 
Antitrust, Commercial, and Administrative Law; Slade Bond, 
Chief Counsel for ACAL; Matt Morgan, Counsel for Constitution; 
Douglas Geho, Minority Chief Counsel for Antitrust, Commercial, 
and Administrative Law; Andrea Woodard, Minority Professional 
Staff Member; and Kiley Bidelman, Minority Clerk.
    Mr. Cicilline. [Presiding.] The Subcommittee will come to 
order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Good morning and welcome to today's hearing, the first in a 
series to conduct much-needed oversight of our broken 
Bankruptcy Code.
    Before we begin, I would like to remind Members that we 
have established an email address and distribution list 
dedicated to circulating exhibits, motions, or other written 
materials that Members might want to offer as part of our 
hearing today. If you would like to submit materials, please 
send them to the email address that has been previously 
distributed to your offices, and we will circulate the 
materials to Members and staff as quickly as we can.
    I also want to remind those who are participating, in 
response to the new guidance issued yesterday by the Centers 
for Disease Control and the Office of the Attending Physician, 
that Members and staff in this room are required to wear masks 
at all times, except when they are under recognition to speak. 
If, for whatever reason, you do not wish to comply with these 
new guidelines, the House will give you the option of 
participating remotely.
    I now recognize myself for an opening statement.
    The cornerstone of our Bankruptcy Code is fairness. 
Fairness is essential to assist in what Congress designed to 
determine who should get what when hard-working, honest 
Americans need a fresh start; and in the case of Chapter 11 
bankruptcies, when corporations cannot pay their debts.
    In the Chapter 11 process, this concept of fairness means 
respecting the rights of all stakeholders without stacking the 
deck in favor of insiders or repeat players. In recent years, 
massive institutions and powerful individuals have abused this 
process to evade accountability for some of the most horrifying 
conduct imaginable. The Sackler family, which made billions of 
dollars off the opioid epidemic that they helped create, are 
abusing the bankruptcy of the company they own, Purdue Pharma, 
to secure lifetime immunity for liability for what they have 
done.
    Child abusers and their enablers are using the bankruptcies 
of the Boy Scouts of America and the Catholic dioceses to 
ensure that they will never have to answer for their crimes. 
The people and organizations that allowed Larry Nassar to 
sexually abuse hundreds of young women for years are using the 
bankruptcy of USA Gymnastics to avoid a reckoning.
    As part of this scheme, these companies hide behind opaque, 
complex provisions of the Bankruptcy Code, controversial 
practices that are cloaked in terms that are almost 
impenetrable--terms like ``nonconsensual and non-debtor 
releases,'' ``temporary stays,'' ``divisional mergers,'' and 
``equitable incentive bonuses.'' Few people could possibly know 
that these provisions often serve as tools to undermine the 
checks and balances that are supposed to prevent powerful, 
lawless corporations from rigging the Chapter 11 process in 
their favor to evade justice.
    This is a systemic problem that is plaguing our justice 
system. We have heard from numerous victims, survivors, and 
families who are caught up in these and other bankruptcies that 
have been weaponized to silence them and to shield wrongdoers 
from accountability. They told us that what was happening in 
the Purdue bankruptcy was also happening to them, and unless 
something changed, it would happen again and again and again. 
These are all clear examples of how Chapter 11 is being abused.
    To be clear, these examples are all systems of a deeper and 
more pervasive problem in the bankruptcy system. It is not just 
the Sacklers and their accomplices. It is the people and 
institutions that enabled Larry Nasser to sexually abuse 
hundreds of girls and young women; the people who enabled the 
criminal acts of Harvey Weinstein; the authority figures and 
surrogate parents who sexually abused uncounted scores of Boy 
Scouts and young parishioners and those who enabled that abuse.
    This must end. We cannot allow this complete and total 
misuse of the bankruptcy system to escape the reckoning that 
the law must provide.
    That is why I am proud to join Chair Nadler, Chair Maloney, 
Senator Durbin, and Senator Warren in introducing the Non-
Debtor Release Prohibition Act of 2021. This important 
legislation would prevent individuals who have not filed for 
bankruptcy from obtaining releases from lawsuits. It would also 
provide other meaningful changes to address this problem, 
including prohibiting the discharge of liability for misconduct 
as part of the bankruptcy process. As we will hear from our 
Witnesses today, this legislation is essential to curb these 
abusive practices before they happen again and stop the abuses 
that are happening now.
    Before closing, I want to recognize the leadership of Chair 
Nadler, who has pushed tirelessly to safeguard and advance the 
rights of workers, students, and consumers in the bankruptcy 
system.
    I also want to acknowledge the hard work of my friend, 
Chair Maloney, and her team on the Committee on Oversight and 
Reform for their commitment to exposing the harm the Sackler 
family and their handpicked executives at Purdue Pharma have 
done to this country and its citizens; for giving a voice to 
the families caught up in the crisis the Sacklers spawned, and 
for shining a light on the Sacklers' efforts to turn the 
bankruptcy system into an accomplice for their crimes.
    With that, I thank the Witnesses for appearing before us 
today, and I look forward to their testimony.
    I now recognize the distinguished gentleman from Colorado, 
the Ranking Member of the Antitrust Subcommittee, Congressman 
Buck, for his opening statement.
    Mr. Buck. Thank you, Mr. Chair.
    This hearing raises important issues and I look forward to 
learning more from our Witnesses today. As several of our 
Witnesses point out in their testimony, the Chapter 11 system 
is generally functioning well, but it is likely in need of some 
changes.
    The first area that I think we should look at is venue 
selection in bankruptcy proceedings. Debtors are handpicking 
which judge hears their cases. For example, in 2020, 39 percent 
of large public company bankruptcy filings went before a single 
judge, David Jones in Houston. In 2020, 57 percent of the large 
public bankruptcy cases ended up before either Jones or two 
other judges, Marvin Isgur of Houston or Robert Drain in White 
Plains, New York.
    For context, there are 375 bankruptcy judges. Three judges 
should not be overseeing so many bankruptcy proceedings that 
have massive ripple effects across this country. This trend is 
particularly troubling because allowing a company to pick a 
judge that they know will give them a favorable outcome 
undermines the checks and balances of the Chapter 11 system.
    I am proud to have cosponsored the Bankruptcy Venue Reform 
Act of 2021 with Representative Lofgren, which simply requires 
that Chapter 11 bankruptcy proceedings take place where the 
principal place of business or principal assets of the 
corporation are located.
    The second issue that I believe warrants additional review 
is the practice of forcing creditors to release their claims 
against non-debtor third-parties in bankruptcy proceedings. 
Under this practice, the non-debtor third-party agrees to pay 
into a trust to be released from any further liability, and the 
funds in that trust go to the claimants or victims.
    Issues arise in this arrangement because the creditors who 
are victims of a company's bad behavior or faulty product have 
no say as to whether they are willing to accept the deal the 
third party is proposing. It is usually just accepted by the 
bankruptcy judge and made part of the bankruptcy proceeding.
    Congress should update Chapter 11 to put sufficient 
safeguards in place to ensure victims are adequately 
compensated while allowing a company to have finality as to its 
liability. Such a change would ensure victims are recompensed 
instead of a company paying relatively little to extinguish 
further liability, and then, trial lawyers being able to grift 
off the funds meant for victims.
    Mr. Chair, I yield back.
    Mr. Cicilline. The gentleman yields back, and I will 
recognize the Chair of the Full Committee and the Ranking 
Member of the Full Committee upon their arrival.
    It is now my pleasure to introduce today's Witnesses.
    Our first Witness is the Honorable William Tong, the 25th 
Attorney General of Connecticut. He took office on January 9, 
2019, and is the first Asian American State-level elected 
official to serve in Connecticut. Prior to being elected 
Attorney General, he served as a State representative in the 
Connecticut General Assembly for 12 years, where he was the 
Chair of both the Judiciary and Banking Committees. He is a 
litigator in both State and Federal courts. Since taking 
office, Attorney General Tong has been a leading voice on a 
number of critical consumer protection issues, perhaps most 
notably in his work to hold the Sackler family accountable for 
their role in creating our nation's opioid epidemic. Attorney 
General Tong received his bachelor's degree from the nationally 
renowned Brown University in my district and his JD from the 
University of Chicago Law School.
    Our second Witness today is Tasha Schwikert Moser. Ms. 
Schwikert Moser is a bronze-medal-winning Olympic gymnast and 
associate at Munck Wilson Mandala's corporate and sports law 
practices. She currently focuses on complex mergers and 
represents athletes in contracts, disputes, and name, image, 
and likeness matters. She also serves as co-chair of the 
special committee for more than 500 survivors of Larry Nassar. 
She and her sister Jordan are among those survivors. Ms. 
Schwikert Moser is a tireless advocate specifically in her 
efforts to support survivors of sexual assault. In 2019, she 
testified before the Texas Senate State Affairs Committee in 
favor of extending the statute of limitations for child sexual 
abuse survivors. Ms. Schwikert Moser received her BA from the 
University of California Los Angeles and her JD from the 
University of Nevada.
    Our third Witness, Alexis Pleus, is the founder, Executive 
Director, and board ex-officio Chair of Truth Pharm. She is a 
licensed professional engineer with more than 25 years of 
experience in the design and construction industry and served 
as an adjunct professor of civil engineering for nine years at 
SUNY Broome. Tragically, in 2014, Ms. Pleus lost her oldest son 
Jeff to a heroin overdose. As a result, she founded Truth 
Pharm, a volunteer, nonprofit organization dedicated to raising 
awareness, reducing stigma, and focusing on education and 
advocacy to reduce the harms of substance abuse. Ms. Pleus also 
serves as co-chair for the New York State Harm Reduction 
Association, on the Statewide Coalition to End Overdose in New 
York, on the National Coalition for Harm Reduction Funding, and 
on the Opioid Network.
    Our fourth Witness is Adam Levitin, the Anne Fleming 
Research Professor and professor of law at Georgetown Law 
School. Professor Levitin has taught at Georgetown Law in 
various posts since 2007. Additionally, he served as a visiting 
professor of law at Harvard Law School from 2012-2013. Before 
joining the faculty at Georgetown, Professor Levitin served in 
Weil, Gotshal & Manges' Business Finance and Restructuring 
Department. While maintaining his post at Georgetown, he also 
served as special counsel to the Congressional Oversight Panel 
for the Troubled Asset Relief Program and volunteer consulting 
attorney to the Delaware attorney general's office. In 2020, 
Professor Levitin was listed as one of Lawdragon's 500 leading 
U.S. bankruptcy and solvency lawyers. He is the author of ``The 
Great American Housing Bubble: What Went Wrong and How Can We 
Protect Ourselves in the Future,'' and has had articles 
featured in the country's leading law reviews and journals. 
Professor Levitin received both his BA and his JD from Harvard.
    Our fifth Witness, Douglas Baird, is the chair of the 
National Bankruptcy Conference and the Harry A. Bigelow 
Distinguished Service Professor of Law at the University of 
Chicago Law School, where he has taught since 1980. Over his 
academic career, he has served as a visiting professor at 
Stanford, Harvard, and Yale's Law Schools. Professor Baird has 
held positions in a number of prominent legal organizations, 
including the American Law and Economics Association and the 
American College of Bankruptcy, and is a member of the National 
Bankruptcy Conference. Professor Baird received his BA from 
Yale College, his JD from Stanford Law School, and an LLD from 
the University of Rochester.
    Today's last Witness, David Skeel, serves as the S. Samuel 
Arsht Professor of Corporate Law at the University of 
Pennsylvania Law School since 2004 and has been professor of 
law there since 1999. Before joining the faculty at the 
University of Pennsylvania, he taught at Temple University and 
later at Temple School of Law. During his academic career, 
Professor Skeel has served as a visiting professor at multiple 
law schools, including Harvard, Duke University, the University 
of Virginia, and Cambridge. He is a member of the Financial and 
Management Oversight Board for Puerto Rico, as well as the 
Advisory Committee on Bankruptcy Rules. Additionally, Professor 
Skeel has published multiple books, including ``True Paradox: 
How Christianity Makes Sense of Our Complex World,'' and 
``Debt's Dominion: A History of Bankruptcy Law in America.'' 
Professor Skeel received his BA from the University of North 
Caroline Chapel Hill and his JD from the University of Virginia 
Law School.
    We welcome all our very distinguished Witnesses, and we 
thank you for your participation.
    I will begin by swearing in each of our Witnesses. I ask 
the Witnesses who are in the room to rise, and I ask the 
Witnesses testifying remotely to turn on their audio and make 
sure that I can see your face, with their right hand raised, 
while I administer the oath.
    Do you swear or affirm under penalty of perjury that the 
testimony you are about to give is true and correct to the best 
of your knowledge, information, and belief, so help you God?
    [Witnesses all respond in the affirmative.]
    Thank you. You may be seated.
    Let the record reflect that the Witness all answered in the 
affirmative.
    Now, I would just remind all the Witnesses that your 
written statements will be entered into the record in their 
entirety. Accordingly, I ask that you summarize your testimony 
in five minutes.
    To help you stay within that timeframe, there is a timing 
light in Webex and in the room. When the light switches from 
green to yellow, you have one minute to conclude your 
testimony. When the light turns red, it signals that your five 
minutes have expired.
    I now recognize Attorney General Tong for five minutes.

               STATEMENT OF THE HON. WILLIAM TONG

    Mr. Tong. Thank you, Chair Cicilline, Ranking Member Buck, 
and Members of the Committee. Thank you for the distinct honor 
of appearing before you today.
    My name is William Tong. I am the Attorney General of the 
State of Connecticut. On behalf of the people of our great 
State, I am here to urge you to stop the abusive practice known 
as nonconsensual/non-debtor releases. In other words, an 
abusive practice by which people who are not in bankruptcy, who 
are not bankrupt, use the bankruptcy process to secure releases 
for themselves and to avoid liability for their own misconduct.
    I don't have to tell the Members here that the opioid and 
addiction crisis is ravaging States and communities across the 
country. Apart from the COVID pandemic, this is the worst 
public health crisis in America. In Connecticut, that means we 
lose more than 1,300 people a year and rising, with more than 
$10 billion a year in damage to our State. That is 1,300 
families wrecked by the opioid and addiction crisis. Across the 
country, almost 100,000 families share this fate, and we have 
seen more than $2 trillion in damage.
    I have the unfortunate distinction of being the home State 
Attorney General for Purdue Pharma and many of the Members of 
the Sackler family who are responsible for this crisis. That is 
why, in December of 2018, Connecticut sued Purdue Pharma and 
the Sacklers. Now, importantly, we focused on the Sacklers for 
their direct participation in helping to cause the addiction 
crisis and for telling lies that had made people sick and has 
gotten them killed.
    They turbo-charged the sales of OxyContin, a molecule very 
similar, almost identical, to heroin. They tell lies about 
opioids, saying that they're not addictive. They tell lies 
about victims, saying that their addiction is their fault. They 
push long-term use. They cover up for doctors who 
overprescribe, and they cover up for pill mills. They sell lies 
like pseudo-addiction, where they say that the reason why 
people get addicted is because they don't have access to enough 
opioids, and if they just had more drugs, they wouldn't get 
addicted. After causing widespread addiction, they attempted to 
profit off that addiction by offering therapies to confront 
addiction and to help people get off of their addiction to 
OxyContin.
    So, Connecticut sued the Sacklers, exercising our state's 
police power to protect the public health and lives of our 
residents. These claims are essentially identical to those of 
our sister States.
    In 2019, the company Purdue Pharma declared bankruptcy. 
Importantly, the Sacklers did not because they are not 
bankrupt. No one believes for a second that the Sacklers do not 
have any money. By conservative estimates, they have taken out 
at least $11 billion from the sale of OxyContin, and they are 
growing wealthier by the minute.
    The Sacklers personally have no basis to seek the 
protections of the bankruptcy court. If they were bankrupt, 
then all their money, all their assets would be in the control 
of the bankruptcy court, and the court could decide to 
distribute those assets to help thousands, if not millions, of 
victims and their families.
    Now, even though the Sacklers are not bankrupt, they have 
used the bankruptcy court to stop States like Connecticut from 
going after them and holding them accountable. They want us to 
agree to a deal in which the Sacklers pay $4.2 billion over 
nine years. Now, let me put that in perspective in case $4.2 
billion sounds like a lot of money.
    Over nine years, if you assume the Sacklers have made at 
least $11 billion in ill-begotten gains, if they pay $4.2 
billion over nine years, that means they will pay less than 
five percent on their money every year. They'll more than cover 
that five percent on the investment income in their offshore 
accounts, and not a single one of them will have to sell a 
house or a boat or a piece of art or jewelry.
    If we don't agree--and that's why I am here today--the 
Sacklers want the court to force us to accept this deal and to 
force sovereign States like Connecticut to release our claims 
against the non-debtor Sacklers. This is an outrage. 
Connecticut is exercising its sovereign police powers against 
the Sacklers. No court in this country has ever held that a 
court may force a sovereign State to release its police power 
claims against a non-debtor. To permit non-debtors to abuse the 
bankruptcy process like this is an outrage, and Connecticut 
strongly encourages you to stop this abuse.
    Thank you, Mr. Chair.
    [The statement of Mr. Tong follows:]
    [GRAPHIC] [TIFF OMITTED] T8645.001
    
    [GRAPHIC] [TIFF OMITTED] T8645.002
    
    [GRAPHIC] [TIFF OMITTED] T8645.003
    
    [GRAPHIC] [TIFF OMITTED] T8645.004
    
    Mr. Cicilline. Thank you, Mr. Attorney General.
    I now recognize Ms. Schwikert Moser for five minutes.
    Just put your microphone on. Thank you.

               STATEMENT OF TASHA SCHWIKERT MOSER

    Ms. Schwikert Moser. Thank you. Chair, Ranking Member, and 
distinguished Members of the Committee, it is a great honor for 
me to appear in front of you today.
    My name is Tasha Schwikert Moser. I am a mother of three 
young children, a wife, an Olympic bronze medalist, and a 
practicing attorney in corporate law and sports law. I am also 
one of the hundreds of survivors of sexual abuse at the hands 
of Larry Nassar, who was the official doctor for USA Gymnastics 
and the United States Olympic and Paralympic Committee.
    I dedicated my entire childhood seeking to represent the 
United States of America at the Olympics. At the age of 15, I 
made our country's women's gymnastics team for the Sydney 2000 
Olympic Games. The team won a bronze. Like the Olympic athletes 
representing our great country in Tokyo right now, my teammates 
and I had to make huge sacrifices to get there.
    My sacrifices came at a horrific cost. I was abused by 
Larry Nassar. At first, Larry gained my trust and confidence. 
After beating up my body day-in and day-out in my goal to win 
for my country, I would see Larry for medical treatment, which 
gave him the opportunity to do unspeakable things to my body. I 
saw Larry because he was the only doctor that USA Gymnastics 
and the Olympic Committee made available to me. I had no choice 
in medical providers. He was the Olympic gymnastics doctor.
    Everyone on the national team and the Olympic team saw 
Larry for medical treatment. When I was part of Team USA at the 
Sydney Olympics, the Olympic Committee and USA Gymnastics had 
our gymnastics team stay outside the Olympic Village. With no 
chaperone present, Larry performed his now infamous medical 
treatments--sexual abuse--on me when I was a child in my own 
sleeping area. He also sexually abused me at the Sydney 2000 
Olympic Games in the actual Olympic stadium.
    I relied on USA Gymnastics and the Olympic Committee for my 
well-being. Both organizations must be held accountable for the 
abuse that happened to me and my hundreds of other survivor 
sisters.
    In 2018, I filed a lawsuit seeking to hold USA Gymnastics 
and the Olympic Committee accountable for my sex abuse. Shortly 
after I filed my lawsuit, USA Gymnastics declared bankruptcy. 
My claim against USA Gymnastics was automatically stayed. I was 
appointed co-chair of the Sexual Abuse Survivors Committee in 
the USA Gymnastics bankruptcy.
    What does the bankruptcy of USA Gymnastics have to do with 
my independent claims against the Olympic Committee? At first, 
I thought absolutely nothing. The Olympic Committee had a net 
worth of approximately $468 million. The Olympic Committee made 
approximately $79 million per year in profits.
    After USA Gymnastics' bankruptcy, I learned a sad reality--
that the bankruptcy would hurt my efforts to get relief in our 
civil justice system for my independent claims against the 
Olympic Committee. Bankruptcy courts asserted extraordinary 
powers that I had never thought possible over my claims against 
the Olympic Committee. The bankruptcy court stayed my claims 
against the Olympic Committee.
    When I recently tried to lift the stay, so I could continue 
my lawsuit against the Olympic Committee, USA Gymnastics 
claimed that I had violated the bankruptcy stay. When USA 
Gymnastics filed a bankruptcy plan, they claimed the bankruptcy 
court had the extraordinary power to release my sex abuse 
claims against the Olympic Committee for abuse that happened at 
the Olympics.
    How could the bankruptcy court decide my claims against a 
non-bankrupt, wealthy corporation like the Olympic Committee? I 
found that bankruptcy laws protect very wealthy organizations 
like the Olympic Committee who are not in bankruptcy and who 
have the ability to fully pay for injuries they caused me. This 
shocked me. I thought it was unfair and unconstitutional.
    I thought it was unfair because, without my consent, a 
bankruptcy court could take away my claims against an 
organization that has not declared bankruptcy. I thought it was 
unconstitutional because the Constitution protects me and all 
Americans from the government taking our property without due 
process and preserves my right to a jury trial.
    I learned that the bankruptcy court could take away my 
claim against the Olympic Committee without a jury trial, 
without my consent, and without the right to opt out of a 
bankruptcy plan. I had no choice in who provided me medical 
treatment which resulted in my sexual abuse. Now, I feel I have 
no choice in this case seeking accountability for that sexual 
abuse.
    While bankruptcies should not be the end of the road for 
sex abuse predators, in many ways it has felt like a giant 
Black hole of truth and accountability against non-bankrupt 
organizations. It has been nearly three years since USA 
Gymnastics declared bankruptcy. The Olympic Committee received 
substantial protection from the bankruptcy courts, yet has 
given no relief to me or the many other Yeasurvivors of their 
despicable conduct.
    I support this legislation because each athlete like me who 
endured this hell and sexual abuse by Olympic doctor Larry 
Nassar, each athlete deserves the ability to make the choice on 
how they will seek justice. Victims and survivors of their 
abuse are then barred from seeking justice and fair 
compensation in the court of law and deprived of their 
constitutional right to a jury trial. This bankruptcy abuse 
must stop, and this is why I support this bill.
    [The statement of Ms. Schwikert Moser follows:]
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    Mr. Cicilline. Thank you so much.
    I now recognize Ms. Pleus for five minutes.

                   STATEMENT OF ALEXIS PLEUS

    Ms. Pleus. Good morning and thank you for having me here to 
testify today.
    Next week will commemorate the seventh year since I lost my 
first-born son Jeff to a heroin overdose. The call came from my 
middle son Jason while I was overseeing a concrete pour at Fort 
Meade. He would only call me during the workday if it was an 
emergency. So, I answered. The signal was weak. There was 
static. There were concrete trucks and construction noises in 
the background. So, I pushed the phone close to my ear, and I 
heard him screaming, ``Come home, mom. Come home.'' Jeff was 
dead.
    Eleven years prior, I was attending Jeff's first football 
game of his junior year. There was a huddle, a whistle blown, 
pushing on the line, a circle of players, and refs on the 
field, parents standing, trying to see who was down, and then, 
a coach waving to me. I rushed to the field. Jeff was rolling 
on his back with his knee pulled to his chest, crying in agony.
    The orthopedics doctor said that it would take surgery, 
extensive physical therapy, and OxyContin to manage Jeff's 
pain, if he ever wanted to play sports again. OxyContin every 
four hours, take it, even if you don't feel the pain, because 
it will be important to stay ahead of it, the doctor said.
    This was 2003. A national crisis was brewing, but we were 
oblivious. There were no headlines about overdose deaths. There 
was no education about the addictive qualities of OxyContin. No 
one told me that it might be hard for Jeff to stop taking those 
pills.
    I glanced at a picture of our family in a frame in our 
living room the other day. Everyone was smiling normal, but 
Jeff had a wide-open comical smile on his face with his hand 
propped on his hip. I'll never see his smile again, I thought 
to myself, and instantly folded over in pain.
    I've been grieving his loss for seven years, and yet, the 
reality still hits me like this at odd times, like fresh news, 
like a punch in the gut that makes you want to curl up in a 
ball on the floor and cry until you can't cry anymore.
    Jeff's life and story is important to all of those who 
loved him, but his story alone is not enough to impact laws. I 
don't expect you to care about him, but the fact that Jeff is 
among 930,000 other people who have died of an overdose since 
1999 certainly should be enough.
    In 2001, when a federal prosecutor reported 59 OxyContin 
overdose deaths in one State, Richard Sackler wrote in an email 
to Purdue executives, ``That's not too bad. It could have been 
far worse.''
    I grew up in a family of strong women who set an example of 
voting, working at the polls, running for town boards, and 
being active Members of political committees. My grandmother 
wrote op-eds from a nursing home bed until she passed. I bring 
this up to mention that I grew up in a family who believed in 
our government, in our governmental processes, who taught me 
that, if you wanted change, there were ways to create it, and 
it is your responsibility. What my family did not teach me is 
the power of corporations, the rich people who benefit from 
them, and the laws that protect them.
    In 2011, after one week of prescription sales doubled 
Purdue's forecast, Richard Sackler said, ``I had hoped for 
better results.'' For the rest of America, we have laws in this 
country to teach personal accountability, no matter how petty a 
crime is. In fact, we even criminalize the illness of 
addiction, despite the fact that incarceration increases a 
person's risk of fatal overdose by 40 times.
    The massive war on drugs has done nothing other than 
perpetuate harm, cause massive human loss, and decimate 
communities of color. I know a Black man sentenced to six years 
for having four baggies of heroin in his pocket. In June, we 
held a rally for a 22-year-old boy who died from medical 
neglect in a jail. He had the smallest amount of drugs possible 
that he was charged for criminal possession, and he died in a 
jail cell for it. The little brother of one of our staff 
Members is currently facing 15 years in prison for a quantity 
of drugs that could fit in a small ladies' purse. These are 
criminals. ``Why should they be entitled to our sympathies?''--
another Richard Sackler email quote.
    In 2012, 259 million prescriptions were written for 
opioids, which was more than enough to give every American 
adult their own bottle of pills. We've seen no intent to sell, 
no drug distribution, and no incarceration for the Sacklers. In 
2018, Richard Sackler obtained a patent for a medication that 
can be used to treat opioid addiction. The patent application 
notes the addictive qualities of opioids.
    I watched a congressional hearing in December where I saw 
Members call the Sacklers the evilest family in America, and I 
had hoped that the mass destruction that was caused by this 
family was being exposed in a way that our lawmakers would get 
to work on ensuring a plan of accountability. Somehow the 
Sacklers are free from the drug war. They walk away unscathed, 
uncharged for mass murder. They have changed and impacted our 
country for generations. They even get to keep the money they 
accumulated as a result, leaving the burden and expense on the 
American people.
    New York State Attorney General Letitia James has shown 
that the family has withdrawn $11 billion from Purdue Pharma, 
protecting their wealth from lawsuits. These slippery suckers 
found a way to not only suck this wealth off the top of the 
corporation, they now found a way to protect the wealth they 
amassed on the graves of our kids, a little loophole called the 
non-debtors' release. It is likely that less than two percent 
of us who have lost a loved one will even receive any 
settlement, not even enough to cover the funerals of our 
children. What I'm asking you to do today is to please close 
this loophole.
    [The statement of Ms. Pleus follows:]
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    Mr. Cicilline. Thank you so much, Ms. Pleus.
    I now recognize Professor Levitin for five minutes.

                   STATEMENT OF ADAM LEVITIN

    Mr. Levitin. Mr. Chair Cicilline, Ranking Member Buck, 
Members of the Committee, and particularly my own 
Representative, Jamie Raskin, good morning.
    My name is Adam Levitin. I'm a professor of law at 
Georgetown University. I'm here to tell you that Chapter 11 has 
got some problems. They're perhaps best illustrated by what's 
going on in Purdue Pharma's bankruptcy. Purdue, of course, is 
the manufacturer of OxyContin, a powerful opioid that played a 
central role in the opioid crisis.
    In a couple of weeks, a bankruptcy judge is going to hold a 
hearing to determine whether to confirm Purdue's Chapter 11 
plan. Under Purdue's plan, opioid victims and other creditors, 
like my own State of Maryland, will be forced to release their 
claims, not just against Purdue, but also against Purdue's 
owners, the billionaire Sackler family. The Sacklers will wipe 
out their opioid liabilities without having to file for 
bankruptcy themselves. Opioid victims will never have their day 
in court. The Sacklers will never have to face their creditors, 
make a full disclosure of their assets, or make all their 
assets available to creditors. Despite allegedly receiving 
billions of dollars in fraudulent transfers from Purdue, the 
Sacklers will actually emerge from Purdue's bankruptcy richer 
than when they went into it.
    How did this happen? The key to the Sacklers getting away 
with it is that Purdue abused the local bankruptcy case 
assignment rules to handpick the judge for its case. Purdue 
picked this judge because it knew that he was likely to rule in 
its favor on all the key issues, including a release for the 
Sacklers. So far, they have not disappointed. Litigation 
against the Sacklers has already been stayed for almost two 
years.
    Now, forum shopping has long been a problem in bankruptcy, 
but Purdue involved something different. In the last several 
years, debtors have learned techniques to handpick individual 
judges whom they believe will rule in their favor. We've gone 
from having forum shopping among districts to shopping for 
individual judges. Judge picking reached such an extreme last 
year when 57 percent of the large public company bankruptcies 
ended up before just three of the nation's 375 bankruptcy 
judges, and one of those three judges is the very judge who is 
presiding over Purdue's bankruptcy.
    Judge picking indelibly taints a case with an appearance of 
impropriety. What's worse, however, is that appellate review, 
the critical check on problems at the trial court level, often 
does not function in bankruptcy. In particular, a doctrine 
called equitable mootness provides that an appellate court will 
not reverse a bankruptcy plan that has been substantially 
consummated to protect reliance on the plan. As a result, in 
many situations a bankruptcy judge's ruling is the final word. 
That means, once the debtor has picked its preferred judge, 
it's game, set, and match.
    This has become the standard operating procedure in big 
case Chapter 11 practice, and it comes at a price. Sometimes 
that price is paid by bond holders who are landlords, but what 
we see in cases like Purdue and Boy Scouts of America is that 
it also comes at the expense of tort victims, of people who 
have already been terribly wronged. That shouldn't happen.
    Now, I don't think you're going to hear any defense of 
judge picking or equitable mootness today. There is recognition 
across the legal academy, and much of the Chapter 11 bar, that 
both are problems that need to be addressed. I believe you will 
hear that third-party releases are a useful tool for making the 
best of a bad situation and that they should be allowed, at 
least under certain circumstances. I would urge you not to heed 
that position.
    The key problem bankruptcy is attempting to address is the 
orderly payment of claims from a limited fund that's 
insufficient to satisfy all creditors. That is about making the 
best of a bad situation. Third-party releases are different, 
however. They are releases of solvent entities, like the U.S. 
Olympic Committee. So, there's no limited fund problem. The 
only problem is that non-debtors don't want to have to pay 
their debts. Third-party releases enable them to get a 
discharge on the cheap by piggybacking on another entity's 
bankruptcy, and the result is perverse. An insolvent debtor is 
required to surrender all its assets, but a solvent non-debtor 
can get a release in exchange for parting with, at most, a 
fraction of its assets.
    While bankruptcy is about trying to make the best of a bad 
situation, it's not a license to trample overdue process 
rights. If the Sacklers, or any other third party, want to 
resolve mass litigation liability in a single proceeding, 
they're welcome to file for bankruptcy themselves. It should be 
axiomatic that the benefits of bankruptcy relief must go hand 
in hand with its burdens.
    I look forward to your questions.
    [The statement of Mr. Levitin follows:]
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    Mr. Cicilline. Thank you, Professor.
    Now, I will recognize Professor Baird for five minutes.

                 STATEMENT OF DOUGLAS G. BAIRD

    Mr. Baird. Mr. Chair, Ranking Member Buck, Members of the 
Committee, I'm Douglas Baird. I'm the Harry A. Bigelow 
Distinguished Service Professor at the University of Chicago 
Law School, and I'm grateful for the opportunity to speak to 
you today on behalf of the National Bankruptcy Conference.
    Since 1979, Chapter 11 has saved many thousands of 
businesses, large and small. As conditions change, however, 
ongoing vigilance against abuse is essential, and nowhere is 
vigilance more important than when the rights of those affected 
are tort victims and involve nonconsensual third-party 
releases.
    I want to say at the outset that an outright prohibition 
against third-party releases is one plausible path forward, but 
it is important to note that taking this course is neither 
obvious nor compelled. Let me focus on what I think is the hard 
case. The hard case arises when the debtor has the exclusive 
right to bring an action against a third party for the benefit 
of all creditors, including tort victims, and this action 
dwarfs the value of an independent action that tort victims 
have against the same party. In many of these cases, the third 
party is unwilling to settle with the debtor without resolving 
the other litigation. Settlement with the debtor alone is 
unacceptable to the third party, even though the stakes in the 
other action are comparatively small.
    Without a release, a third party would have to go through 
the time and effort of litigating many of the same factual 
issues again. In such a case, the ability to negotiate and 
implement a global compromise that includes both the State 
claims, and the direct actions of the tort victims can bring 
about a resolution that produces the best possible outcome in 
the shortest amount of time. This is appropriate when the 
settlement enjoys broad support from a vast majority of each 
class of shareholders, including the tort victim class.
    Now, what often happens, even when there is widespread 
acceptance of a Chapter 11 plan, there are holdouts. Overcoming 
such holdout problems, however, is a standard function of 
bankruptcy law. Third-party releases in the hands of able 
professionals and a fair judge can bring about the resolution 
of a hard case, such as my hypothetical, relatively quickly and 
on terms that are much better than could be achieved without 
them.
    Much depends, of course, on the judge. This country is 
blessed with a strong bankruptcy bench. Judges tend to approve 
nonconsensual third-party releases only if a number of 
conditions are satisfied. Judges are rarely willing to approve 
third-party releases unless the plan enjoys broad support from 
a large majority of the tort victims themselves. Judges are 
inclined to approve a third-party release only when the non-
debtors' action against the third party is a small part of the 
picture, and even then, only when the settlement gives the tort 
victims as much as they would receive in any other fora.
    In addition, a strong bankruptcy judge ensures that due 
process is given and that everyone has the right to be heard, 
and she also approves releases only when the reorganization 
could not go forward without them. It should be emphasized that 
this justification for third-party releases has nothing to do 
with solicitude for the tortfeasors. They have no right to 
enjoy any of the protections of the Bankruptcy Code. They're 
getting releases only because they can exploit the doubts and 
uncertainties in the causes of actions against them. This gives 
them the ability to demand releases as a condition of 
settlement.
    Of course, this is only one side of the story. There is a 
risk that permitting such releases gives the bankruptcy judge 
too much discretion. The multifactor test for third-party 
releases that permeate the case law are themselves a recipe for 
mischief. For this reason, it is possible and reasonable to 
conclude that nonconsensual third-party releases should be 
prohibited categorically. Such a prohibition may lead to the 
liquidation of some businesses and lower recoveries for tort 
victims in some cases, but this may be a price worth paying, if 
the potential for abuse is too high.
    The matter, in short, is not clear-cut. As illustrated by 
the provisions in the Bankruptcy Code, explicitly allowing such 
releases in asbestos cases--something between maintaining the 
largely direction-less status quo and outright prohibition--may 
be the most sensible course. Third-party releases might be 
explicitly authorized, but only if specific procedural and 
substantive hurdles are met.
    Again, the challenges presented by third-party releases, 
like others facing the bankruptcy system, resist simple 
solutions and easy answers. As you pursue the hard challenges 
you face here, the National Bankruptcy Conference stands ready 
to provide its assistance.
    Thank you.
    [The statement of Mr. Baird follows:]
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    Mr. Cicilline. Thank you very much, Professor.
    I now recognize Professor Skeel for five minutes.

                STATEMENT OF DAVID A. SKEEL, JR.

    Mr. Skeel. Thank you for the opportunity to testify this 
morning. It is a great honor to appear before you.
    My testimony can be distilled to two simple points. First, 
the danger of abuses in the system is very real, and we've 
already heard about some of those concerns about abuses. I 
applaud you for devoting multiple hearings, along with this 
one, to investigating these issues.
    Second, many of the key issues under discussion are 
complicated and involve provisions or transfers that can be 
either beneficial or pernicious. In my view, it's very 
important to take the risk of possible unintended consequences 
into account before amending the bankruptcy code in these 
areas.
    Bankruptcy is designed to provide a collective forum for 
resolving financial distress. In my view--and here I'm 
following insights that were first developed by Professor Baird 
and a colleague, Thomas Jackson--the Bankruptcy Code generally 
should not deviate from non-bankruptcy law, except where the 
deviation is needed to provide that collective forum. 
Otherwise, there may be significant costs and unintended 
consequences from having two different sets of rules--one 
outside of bankruptcy and one in bankruptcy.
    The first topic listed for this hearing, and one that we've 
already talked a great deal about, is non-debtor releases, 
which are also sometimes called third-party releases. In my 
view, there are good arguments both for and against non-debtor 
releases, both as a legal matter and as a policy matter.
    One argument against non-debtor releases which we've 
already heard is that the benefits of bankruptcy shouldn't be 
extended to individuals or entities such as the Sacklers that 
are not themselves in bankruptcy. Another argument, which we've 
also heard, is that it's unfair to release claims that victims 
or others would otherwise be able to bring in a situation where 
those victims haven't agreed to release those claims.
    On the other side are arguments that the treatment of non-
debtors such as the Sacklers, that treatment is so closely 
related to the debtors' bankruptcy case that you really can't 
resolve the financial distress of the company without also 
resolving the claims against the non-debtors. It's also 
possible--and it's sometimes argued--that victims may actually 
in some cases receive better compensation in connection with a 
release than they would be if they litigated against the non-
debtors outside of bankruptcy.
    So, what should be done to limit abuses? It seems to me, at 
a minimum, that a sensible solution might be to insist on more 
transparency about the non-debtors' assets and ability to 
contribute--the same kinds of things we expect from debtors in 
opening their books to be looked at. Perhaps there should be a 
structured inquiry by the bankruptcy court into the question of 
whether the contribution is significant enough.
    Another issue on the hearing's agenda is executive bonuses 
shortly before or after filing for bankruptcy. Once again, 
bonuses can be pernicious or beneficial, depending on how 
they're used. In my view, the risk of self-dealing, the risk of 
misusing bonuses, is much more severe if the bonus is given 
before bankruptcy, when nobody's watching, than it is once the 
debtor has filed for bankruptcy, or what are called post-
petition bonuses. With post-petition bonuses, there's more 
transparency; there's a requirement of a hearing, and 
participants have an opportunity to challenge or to question 
the bonus. In my view, as a result, pre-bankruptcy bonuses 
should be viewed with more skepticism than post-petition 
bonuses, not less.
    In 2005, Congress enacted a reform that essentially had the 
opposite effect. It largely banned all post-petition so-called 
stay bonuses. In my view, this provision has not worked 
particularly well in practice, and it really underscores the 
importance of being mindful of the possibility of unintended 
consequences from legislation.
    Given the complexity of the issues that we're talking about 
this morning, my hope is simply that you be especially mindful 
of potential unintended consequences, as you decide which 
changes or whether to make changes to the Bankruptcy Code in 
the coming weeks and months.
    Thank you.
    [The statement of Mr. Skeel follows:]
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    Mr. Cicilline. Thank you, Professor Skeel, and thank you to 
our Witnesses for your opening statements.
    Before we turn to our round of questions, I would like to 
recognize the Chair of the Full Committee, Mr. Nadler, for his 
opening statement.
    Chair Nadler. Thank you, Mr. Chair.
    Before I begin, I just want to thank the Witnesses for 
sharing their powerful testimony with us today.
    Today's hearing is the first in a series of hearings 
examining potential reforms to ensure that commercial and 
consumer bankruptcy processes function effectively to support 
the economy, provide a meaningful option of last resort for 
individuals and businesses, and that they are not abused to 
deprive people of their rights or livelihoods.
    In 2005, as the Ranking Member of this Subcommittee, I 
fought against the Bankruptcy Abuse Prevention and Consumer 
Protection Act, a disastrous amendment to the Bankruptcy Code 
that stacked the deck against everyday consumers in favor of 
creditors and giant companies. Many of the problems of our 
bankruptcy system stem from that law, which makes it more 
difficult for Americans who have fallen on hard times to escape 
crushing debt.
    With that in mind, it is essential that we examine a wide 
range of topics as part of this series. This includes how 
student loans are treated in bankruptcy; the racial disparities 
that exist in the use of the consumer bankruptcy system; the 
rights of workers and retirees in bankruptcy, and the role of 
the U.S. Trustee Program. These hearings will explore solutions 
to help people get a fresh start and a fair deal through the 
bankruptcy system.
    Those principles are also at the heart of today's hearing, 
which will examine corporate misuse of the bankruptcy system, 
especially a procedure by which wrongdoers can be immunized 
from liability without agreement from the wronged party in 
another entity's bankruptcy proceeding.
    The bankruptcy system is supposed to work for everyone, but 
in many cases, it works only for the powerful. Too often, it 
works best for big corporations and the very wealthy, who have 
not even filed for bankruptcy, who have figured out how to make 
the system work to their benefit, nonetheless.
    That is exactly what we are dealing with today, bankruptcy 
grifters, a term coined by Professor Lindsey Simon, that leach 
off another entity's bankruptcy to hide their misdeeds, silence 
victims, and secure their ill-gotten gains.
    As Chair Cicilline said, today's hearing also builds off 
the important work of my good friend, Chair Maloney. She has 
conducted a thorough, tireless investigation of the role of the 
Sackler family and Purdue Pharma in the opioid crisis. Under 
her leadership, the Committee on Oversight and Reform has shown 
the devastating impact that the corporate bankruptcy process 
can have on ordinary Americans.
    In particular, she has helped shine a light on one of the 
most troubling aspects of the Purdue Pharma settlement--the use 
of a lifetime ``get out of jail free'' card, known as a 
nonconsensual non-debtor release. Under this provision, the 
Sackler family, who have not had to file for bankruptcy 
themselves, will escape liability entirely for their role in 
precipitating the opioid crisis, despite the objections of many 
of their victims.
    The families of the people who died from addiction and 
misuse of OxyContin should be able to hold accountable the 
people that flooded the country with a dangerous drug they knew 
would be abused. That is why today I was proud to introduce, 
along with Senator Warren, Senator Durbin, Chair Maloney, and 
Chair Cicilline, the Non-Debtor Release Prohibition Act of 
2021. Our bill will ban nonconsensual non-debtor releases in 
most circumstances, impose strict standards for consensual non-
debtor releases, and address the use of divisional mergers to 
shield a company's assets from bankruptcy.
    I want to thank Senator Elizabeth Warren for our work 
together to develop this important legislation. She is a 
powerful advocate for ensuring that the bankruptcy system works 
for people instead of against them, and I am proud of our 
partnership on these crucial reforms to the Bankruptcy Code.
    Most important of all, I want to thank the victims, 
survivors, affected families, and advocates who have come 
forward to say that the bankruptcy laws should not be allowed 
to force anyone, no matter who you are, into giving up their 
last chance at some semblance of justice against someone 
grifting off the bankruptcy process. Victims of sexual assault 
should be able to hold their abusers and the people and 
institutions that enabled those abusers accountable. No one 
should be coerced into giving up their right to a fair trial 
before a jury of their peers. No one should be powerless to 
stop a corporate insider from looting the company they invest 
in, and no one should be able to evade accountability by gaming 
the bankruptcy system. Coerced non-debtor releases fall far 
outside the limited jurisdiction of the bankruptcy courts and 
they are inconsistent with the Fifth Amendment's right to due 
process of law.
    Today's hearing is an opportunity to conduct meaningful 
oversight over this concerning trend and other abuses of the 
bankruptcy process and to examine potential solutions to 
reverse them. I thank Chair Cicilline again for holding this 
important hearing. I enjoyed the testimony from our exceptional 
panel of Witnesses.
    I yield back the balance of my time.
    Mr. Cicilline. The Chair yields back.
    We will now proceed under the five-minute rule, and I will 
recognize myself for five minutes.
    First, I want to say thank you to our Witnesses for your 
testimony, and particularly, thank you, Ms. Schwikert Moser and 
Ms. Pleus, for your really important testimony. I know every 
time you are asked to come and share these experiences, it 
causes you to again experience some tremendous pain, but know 
that it is very valuable for the Members of this Committee and 
for the American people to understand that there are real 
people who are hurt by the current failures in our bankruptcy 
system. I am grateful for your courage and your willingness to 
come forward and share that with the Committee.
    I was really struck by, as I listened to both of your 
testimonies, is kind of how common your experiences sounded. I 
wondered, maybe starting with you, Ms. Schwikert Moser, what 
about Ms. Pleus' experience kind of resonated with you, and 
similarly, what about Ms. Schwikert Moser's resonated with you, 
if you wouldn't mind sharing those thoughts?
    Ms. Schwikert Moser. I think it's the pain. It's not being 
able to get your day in court, not being able to hold USA 
Gymnastics and the Olympic Committee accountable, just like 
Alexis and her son, and not being able to hold the Sacklers 
accountable. They get to swoop in and barely put any money in 
the pot, and then, they just get off--get off; they're not 
liable, and they get to go on with their lives, but we're 
sitting here holding the bag, holding the pain. At the end of 
the day, that's what we have to live with.
    Mr. Cicilline. Thank you.
    Ms. Pleus. I think the situations are so incredibly 
similar. When we think about corporations, I think a lot of 
times people and organizations, they think of these decisions 
not being made by individuals, or there not being a specific 
person that you can point to the blame of who caused the harm. 
Certainly, in Tasha's case, we can see that there was one 
perpetrator who very specifically caused these harms and 
somehow is protected.
    It's the same thing with Purdue and the Sacklers. We see 
that the Sacklers played a specific role in this. They were the 
people who caused the harm, just like in Tasha's situation, and 
yet, they found a way to be protected. That is our laws that 
are doing that, and it makes all of us feel like there is no 
justice in this world. I think that those of us who have 
survived things like this want to see the world in a different 
way.
    Mr. Cicilline. Thank you so much.
    Professor Levitin, it seems that, for large corporate 
bankruptcies, the Chapter 11 process has markedly diverged from 
its ideal as bringing parties together to maximize the total 
return. You have described a wide-scale breakdown of Chapter 11 
bankruptcy's checks and balances. Other observers have warned 
that Chapter 11 has taken on a Wild West approach that has led 
to chaos, bankruptcy hardball, and an all-out war between 
creditors, debtors, and powerful non-debtors.
    I am just wondering, Professor Levitin, how do the abuses 
you and Attorney General Tong have described, that Ms. 
Schwikert Moser and Ms. Pleus have described, fit into this 
broader breakdown of the Chapter 11 process?
    Mr. Levitin. Sure. I think there are three key pieces to 
what's going on.
    One is that you have a situation in which debtors are now 
able to handpick the judge for their case. When debtors are 
looking for a judge, they're looking not--they don't want a 
judge who's a great judge. They want a judge who's great for 
them. Indeed, some debtors' attorneys have told me that they 
feel they actually have a duty to their clients to try and pick 
the judge that's best for them.
    So, debtors are hand-selecting a judge on the belief that 
judge is going to favor them on every key issue. They know that 
there's not going to be effective appellate review in most 
instances, in particular, because of this doctrine called 
equitable mootness. Once they have that, that gives debtors 
free rein to engage in very aggressive restructuring 
techniques, including non-debtor releases, but there's a whole 
host of other practices that they engage in, and they know that 
there's really no check, other than that single bankruptcy 
judge.
    They've picked the bankruptcy judge knowing that the 
bankruptcy judge isn't going to stand in the way, in part, 
because the handful of bankruptcy judges who are landing the 
big cases right now, they're actively competing to get these 
cases. The way judges are competing to get cases is by 
indicating that they're going to accommodate debtors' requests. 
Most bankruptcy judges are not competing, but there's a handful 
who are, and that's creating a race to the bottom among 
bankruptcy courts and it's a real problem.
    Mr. Cicilline. Thank you, Professor.
    Before I conclude, I just want to thank Attorney General 
Tong for his extraordinary leadership and being such a 
trailblazer in this area, and again, for being here today.
    My time has expired, and I now recognize the gentleman from 
North Carolina, Mr. Bishop, for five minutes.
    Mr. Bishop. I thank the Chair.
    Professor Levitin, I am trying to remember--I practiced as 
a commercial litigator in sort of a small firm. So, I 
represented a lot of--I had a lot of frustrations on their 
behalf in bankruptcy court over the years. I had some 
understanding of some of this and some of it is leaking from my 
memory.
    Let me ask you this, if I could, Professor Levitin: If you 
had, let's say, a concern of some size--I don't know--$100 
million in revenues, but they were a client of a huge 
accounting firm, and there is a basis for alleging that the 
accounting firm had been neglectful in preparing an audit. So, 
as part of the claims of the bankruptcy estate, that entity 
was, the $100 million company, was in bankruptcy. You could 
pursue those claims, the trustee, or whatever, could pursue 
those claims against the accounting firm.
    I assume that one use of this non-party release would be to 
enter into a settlement with the accounting firm. You wouldn't 
have a claim that would be anywhere near big enough to have any 
prospect of bankrupting the accounting firm, let's say. You 
want to be able to get a recovery from the accounting firm, if 
you can. I assume you would use one of these non-party releases 
to affect that settlement.
    If they were willing to contribute to the bankruptcy estate 
something to settle that liability, they would get a release. I 
assume that would be part of the plan, and then, it would have 
to be confirmed by a vote of the creditors. If somebody 
objected, the Bankruptcy Court could just cram down on that one 
category.
    Am I right? Would that be one of the uses of this?
    Mr. Levitin. So, I think it's important to distinguish two 
different types of releases that are going on, who's claims are 
being released. It's completely standard and not in any way a 
problem for the claims of the debtor corporation against that 
accounting firm to be released. That's like the claims of 
Purdue against the Sacklers. So, Purdue, as a debtor, has 
claims against the Sacklers for fraudulent transfers. If Purdue 
wants to settle those claims, that's not this issue.
    Instead, the issue is when there are direct claims of 
creditors against the third party. So, if there is an opioid 
victim who says, ``I have a direct suit against the Sacklers. 
I'm not suing Purdue; I'm suing the Sacklers''--
    Mr. Bishop. Right.
    Mr. Levitin. That's what's getting released and that's 
different.
    Mr. Bishop. Okay.
    Mr. Levitin. That's really the problem.
    Mr. Bishop. That is helpful. I remember at the vague edge 
of my memory a distinction between claims that can be 
administered by the Bankruptcy Court and claims that cannot of 
creditors. I think what you are into--and I have forgotten the 
details, but let me pose another example.
    Like in the asbestos case is where the Bankruptcy Court 
creates a massive, perhaps essentially all the worth of a 
corporation that has been engaged in the sale or distribution 
of asbestos or a manufacturer, and they create these asbestos 
trusts. Then, people who have been injured by it--and I assume 
those are the categories of claims you are talking about--have 
sole recourse against the bankruptcy trust and can't go out in 
the State court and keep suing that entity, I guess. Again, I 
am sorry of I am mangling this some.
    Would that be precluded? Is that the kind of thing you want 
to preclude?
    Mr. Levitin. Yes, generally. Asbestos cases are different. 
There's a special statutory provision for asbestos cases.
    Mr. Bishop. Yes, yes.
    Mr. Levitin. One of the implications of that is that it's 
not allowed in other situations. Yet, the asbestos technique 
has been extended to situations not involving asbestos.
    Even with asbestos, there are only four limited categories 
of parties that are entitled to a third-party release under 
that provision. That relates to, it's the owners of the debtor, 
officers and directors of the debtor, insurers, and parties 
that were involved in, basically, financing the debtor. They 
all have, to get that release, they have to make a substantial 
contribution to the bankruptcy estate.
    What's going on now, are not just releases of those parties 
in exchange for a substantial contribution, but we're getting--
it's a standard practice to see releases of all kinds of 
parties that have made no contribution whatsoever to the 
bankruptcy estate. This is what's going on in Purdue. There is 
a laundry list of consultants, attorneys, lobbyists for Purdue 
for all--
    Mr. Bishop. Okay, I get your point. Let me cut you off, 
just because I have got about 30 seconds left and I want to get 
one more question to you, sir, because it's has been helpful to 
me.
    I know we are going to have a lot of looking into this, 
but--I am sorry, I lost my train of thought. Oh, yes, you said 
about the judges, this ability to pick your judge. What sort of 
reform could we--it sounds like there is a problem of exercises 
of discretion. How can we fix that problem, if you didn't want 
to go to the issue of taking this tool out entirely?
    Mr. Levitin. Sure. There's an easy fix. Require that all 
non-Subchapter V cases under Chapter 11--that's everything 
except the small business bankruptcies--that those cases be 
randomly assigned among judges within a district without regard 
to divisions, geographic divisions, within the district.
    Mr. Bishop. Why isn't that--
    Mr. Levitin. That solves, that solves the problem.
    Mr. Bishop. I'm asking for indulgence. Why isn't that 
happening now? How are they assigned now?
    Mr. Levitin. The assignment varies by district. In some 
districts, like the Southern District of Texas, you actually 
have a complex case panel. That's only two of the five judges. 
So, you're getting one of two judges, if you file in the 
Southern District of Texas. The other three judges, even though 
they're equally qualified, never see a big Chapter 11 case.
    In other districts it's done geographically in some cases. 
In other places, say Arizona, it's just random. The Middle 
District of Florida says it's going to be geographic, but if 
there's any indication that a debtor is trying to maneuver in 
front of a judge, it's then going to be randomized. So, it 
really is done on an individual court level.
    Mr. Levitin. I thank you.
    I yield back.
    Mr. Cicilline. It sounds like a bill there, Mr. Bishop.
    I recognize the gentleman from New York, Mr. Nadler, for 
five minutes.
    Chair Nadler. Thank you, Mr. Chair.
    Professor Levitin, you described the problem of judge 
picking, where I think you said three out of over 337 judges 
get all the big cases. How would you stop this judge picking? 
What can we do to stop this judge picking?
    Mr. Levitin. In the first instance, I think that it would 
be to require, as I was just saying to Mr. Bishop from North 
Carolina, that cases, large Chapter 11 cases, or really all 
Chapter 11 cases other than the small business cases and the 
individual debtor cases, should be randomly assigned to judges 
within a district without regard for geographic divisions or 
complex case panels, or the like. Basically, you should have a 
random draw within districts.
    It doesn't entirely solve the problem, and you do have some 
districts where there's only going to be one or two judges, but 
I think it substantially solves the problem, because the judge 
picking is going on in districts where you have a large number 
of judges already and most of those judges are being ignored.
    So, take your own district. The Southern District of New 
York, most of the cases are going to one particular judge, 
Judge Robert Drain who's sitting in White Plains, New York. 
There are seven other excellent judges sitting at Bowling 
Green, in the Bowling Green Courthouse in Manhattan. They're 
not getting the cases. So, they're going to White Plains.
    If you have--and that's debtors are doing really incredible 
maneuvers to manipulate the judicial, the local role in case 
assignment there. So, cases filed in Westchester County go to 
Judge Drain. What do debtors do? They rent short-term office 
space in office parks--
    Chair Nadler. How would you prevent this statutorily?
    Mr. Levitin. I think that you--I'm not--so, the process 
would probably be best done, handled by the Rules Committee for 
the courts to have a Federal Rule of Bankruptcy Procedure that 
deals with case assignment. I assume that you could do this 
with direct legislation yourself.
    Chair Nadler. Thank you.
    Ms. Pleus--I hope I have the pronunciation correct--Ms. 
Schwikert Moser described the USA Gymnastics bankruptcy as a 
``black hole of truth and accountability.'' Would you say that 
also describes the Purdue Pharma bankruptcy? How would banning 
non-debtor releases help bring truth and accountability to the 
Sacklers?
    Ms. Pleus. Could you repeat the question. I'm sorry.
    Chair Nadler. Ms. Schwikert Moser described the USA 
Gymnastics bankruptcy as a ``black hole of truth and 
accountability.'' Would you say that also describes the Purdue 
Pharma bankruptcy? How would banning non-debtor releases help 
bring truth and accountability to the Sacklers?
    Ms. Pleus. Yes, absolutely, I would say that the situation 
is very similar. What we know, as I mentioned in my testimony, 
is that Richard Sackler played a direct role, the Sackler 
family played a direct role in the decisions that were made for 
Purdue Pharma. Yet, when we see the numbers from this 
bankruptcy, we see that the settlement is $4.3 billion over 
nine years, but the Sacklers were able to take $11 billion off 
the top of the company first. So, they're walking away with 
more money in their pockets than the U.S. Government--it's not 
even individuals who are getting this claim. We have to 
understand that it's mostly the States. It's very few of us who 
have lost a loved one who will get a claim at all. Most of us 
sit confused wondering what--
    Chair Nadler. How would banning non-debtor releases help 
stop this?
    Ms. Pleus. Say that again? I'm sorry.
    Chair Nadler. How would banning non-debtor releases help 
bring truth and accountability?
    Ms. Pleus. Well, then, we would have that $11 billion 
upfront. The $11 billion that the Sacklers took, we would have 
upfront. So, yeah.
    Chair Nadler. Thank you.
    Ms. Schwikert Moser, the bankruptcy process is supposed to 
be about fairness, about getting a fresh start, and how money 
is distributed when there is not enough to go around. Of 
course, the process of holding people accountable for sexual 
abuse is about much more than money. From what you have seen of 
the bankruptcy system, do you think it is ever appropriate to 
force victims of sexual abuse or other misconduct to give up 
their rights against the third parties who harmed them?
    Ms. Schwikert Moser. Absolutely not. I think Professor 
Levitin hit the nail on the head when he mentioned third-party 
releases where creditors have direct claims against the debtor. 
I was abused by Larry Nassar, the team doctor picked by USA 
Gymnastics and the Olympic Committee, in the Olympic Stadium, 
in the actual stadium, during the Olympics.
    I have direct claims against the Olympic Committee. They 
are an entity that has the ability to pay but they want to 
abuse the bankruptcy process by forcing victims like me and my 
other sister survivors to release our claims against them. It 
is absolutely unfair, and it needs to be stopped.
    Chair Nadler. Thank you. Finally, Attorney General Tong, 
people who defend the use of non-debtor releases say that they 
can deliver a bigger settlement in the bankruptcy process which 
benefits everyone. What would you say to that argument?
    Mr. Tong. I would say that is clearly not the case, and the 
threat of being able to abuse this process like the Sacklers 
might be able to secure nonconsensual, non-debtor releases, 
that that threat looms large over this entire process. With 
respect to my colleagues and lawyers for victims and families 
like Ms. Pleus's family, the threat that the Sacklers might get 
away with it pushes that number down, right. So, people rush to 
make a deal because they are worried if they don't make a deal, 
the judge will cram the deal down and force us to accept 
releases and that is one of the real problems with these 
nonconsensual, non-debtor releases.
    Chair Nadler. Thank you. My time is expired. I yield back.
    Mr. Cicilline. The gentleman yields back.
    I now recognize the very distinguished gentleman from 
Louisiana, Mr. Johnson, for five minutes.
    Mr. Johnson of Louisiana. Thank you, Chair Cicilline. I 
just want to reiterate before I start here, we really do 
appreciate the Witnesses coming in. It is not easy to tell your 
stories and it is tragic and disgusting, and what else can we 
say? Thank you for your courage. I practice constitutional law, 
so bankruptcy law is a new field for me and I am trying to wrap 
my mind around it, so I appreciate all the expertise.
    There has been a lot of talk about the nonconsensual, non-
debtor releases and let me ask a question that maybe Professor 
Baird, how much scrutiny do these releases get before a plan is 
confirmed? So, for example, do claimants challenge these 
releases? Do U.S. Trustees ever object, or how common would 
that be?
    Mr. Baird. No. Again, it depends on the judge, and it is 
certainly possible for judges not to exercise the kind of 
oversight they should. The U.S. Trustee will typically object. 
The unsecured creditors' Committee should object. All the tort 
victims themselves are parties of interest who have the ability 
to appear.
    Again, a large part of the design of the bankruptcy code is 
to create an environment in which there are negotiations, and 
the bankruptcy judge has to exercise oversight and the hard 
question for you is whether or not there is sufficient 
direction on the bankruptcy judge and whether or not specific 
procedural and substantive standards should be imposed in this 
area in order to ensure that bankruptcy judges do the job they 
are supposed to do.
    I want to emphasize; I agree with Professor Levitin that we 
have an extraordinarily capable bench of bankruptcy judges 
and--but just because they are extraordinarily capable doesn't 
mean that they shouldn't be given direction.
    Mr. Johnson of Louisiana. Some of these judges, some courts 
have barred nonconsensual, non-debtor releases, related 
injunctions they believe they are unlawful. What is the basis 
of that conclusion?
    Mr. Baird. The bankruptcy code has specific provisions for 
asbestos. It is silent with respect to non-debtor, third-party 
releases except there is very broad language in the section 
called 105 that gives broad powers to the bankruptcy judges. 
So, the open question on which the circuit courts are split is 
whether or not that broad discretion includes third-party 
releases.
    As you have heard, there are some policy arguments why, if 
appropriately used, it is appropriate, but some courts have 
said no, that is a bridge too far; we don't want to do it. 
Again, there is an opportunity to voice a specific view here, 
whether to ban them outright, whether to permit the status quo 
to continue in which most of the circuit courts--the 2nd, 
especially the larger ones, the 2nd Circuit, the 3rd Circuit, 
the 7th--admit that you can keep in place the status quo or you 
can corral the discretion.
    This is, I will emphatically agree with what has been said 
before, this is an area where serious oversight is necessary 
and reassessing these third-party releases is something that is 
very important.
    Mr. Johnson of Louisiana. I lived and worked and practiced 
in the 5th Circuit--Louisiana, Texas, Mississippi. Where is the 
5th Circuit on this? Have they--
    Mr. Baird. The 5th Circuit has opposed it.
    Mr. Johnson of Louisiana. Opposed it. I have just a minute 
and a half left. I will yield back, Mr. Chair.
    Mr. Raskin. Would the gentleman yield?
    Mr. Johnson of Louisiana. Yes, I will happily yield, sure.
    Mr. Raskin. Thank you, Mr. Johnson. I think I might be 
next, and I wanted to start with this.
    I mean the chances that three judges would be drawn out of 
375 judges 57 percent of the time is less than one in a 
million. Anyway, I have a young mathematician on my staff who 
is going to give us the exact number of what the chances are 
that that would happen randomly. Of course, it should be random 
and I am totally for random assignment. If Mr. Bishop wants to 
co-sponsor a bill or Mr. Johnson, I would love to do it with 
you guys.
    Let me ask you this. Professor Levitin, my distinguished 
constituent, why are the judges competing to get the cases, how 
are they competing, and to what detriments of the public 
interest?
    Mr. Levitin. So, why they are, the motivations, I would 
have to speculate. I don't know what is driving any particular 
judge. Remember, most judges do not seem to be competing for 
large cases, but I think for the handful that are, part of it 
is that they like being at the center of attention with a big 
matter. That they would rather be dealing with, they come from 
large case Chapter 11 practices themselves and they would--that 
is the bar that handles the big cases. Those are their people, 
and they would rather deal with those lawyers than deal with 
the local lawn care business or the--
    Mr. Raskin. Okay, but how do they compete?
    Mr. Levitin. How do they compete? They compete by sending 
out signals to debtors that if they file in their court that 
the debtors are going to get favorable treatment. The way that 
you--here is an example of how they send out a signal. In 
Texas, the Southern District of Texas has a complex case panel, 
and it has an advisory panel for that. If you look at who is on 
the advisory panel, over half of them are not even admitted to 
practice in Texas.
    So, they are getting instead--who is on the advisory panel? 
It is the heads of major debtor-side practices. It is a way of 
saying, hey, we are here to listen to you and we are going to 
do--and we are going to--our courtroom is ready for you. In 
fact, one of the Texas judges has even raised--talked about 
making the court more customer-friendly. I am not aware of 
courts having--
    Mr. Jones. [Presiding.] The gentleman's time is expired. 
Regrettably, to the gentleman from Maryland, his time was not 
next. The Chair now recognizes himself for five minutes of 
questioning.
    Thank you to Chair Cicilline and, of course, to the Ranking 
Member, Mr. Buck, and thank you to all our Witnesses. My 
heartfelt thanks, especially to Ms. Schwikert Moser and Ms. 
Pleus, in particular, for your courageous testimony. We are all 
profoundly grateful and we stand with you in this fight for 
justice.
    Now, as the Member representing the great city of White 
Plains, I feel obligated to apologize for the behavior of Judge 
Drain. I, myself, was a lead attorney on a case that ultimately 
ended up before him in bankruptcy court, and I associate myself 
with those of you who have suggested that he is overly 
solicitous of wrong-doing corporations.
    As we have heard this morning, the powerful are exploiting 
the Chapter 11 bankruptcy process. Bankruptcy law is 
complicated, but their playbook is simple. They harm people for 
profit then use bankruptcy law to make the people they have 
harmed pay the price.
    With my time, I would like to discuss another powerful 
industry that has been exploiting the bankruptcy process and 
that is the fossil fuel industry. The fossil fuel companies 
make their billions by polluting air and water, degrading land 
and emitting the greenhouse gases that fuel the climate crisis, 
often in blatant violation of Federal law. Then they exploit 
Chapter 11 bankruptcy, so they don't have to clean up the 
messes that they have made or make amends to the communities 
whose health, land, and livelihoods they have harmed.
    Through the Chapter 11 bankruptcy process, fossil fuel 
companies can split up their assets and their liabilities, 
keeping their most valuable assets in one company and 
offloading their environmental debts to another. Once they have 
divided up like that, neither communities nor environmental 
regulators can enforce the payment or clean-up duties otherwise 
required by law.
    In theory, these are illegal, fraudulent transfers, but in 
practice fossil fuel companies are getting away with them. 
Since Peabody Energy first pulled this trick off nearly 15 
years ago, many of the country's biggest fossil fuel companies 
have followed suit. In the last six years, over 260 oil and gas 
companies have declared bankruptcy. Since 2012, over 50 coal 
companies have done the same. Those coal companies alone have 
exploited Chapter 11 to offload billions in environmental 
obligations onto the American people.
    The EPA estimates that it will cost taxpayers 50 billion 
dollars to clean up the hundreds of thousands of mines 
companies have abandoned to protect their profits. While the 
rest of us are expected to clean up the messes that we make, 
fossil fuel companies responsible for environmental destruction 
on a global scale are exploiting Chapter 11 to avoid this basic 
responsibility.
    Professor Levitin, in your written testimony you discuss 
the importance of enhancing remedies for fraudulent transfers 
like these, including divisive mergers. Could you walk us 
through your recommendations?
    Mr. Levitin. Sure. So, there is--let's do this in two 
parts. Let's talk about fraudulent transfers, generally, and 
then divisive mergers as a second subset. Fraudulent transfer 
law is among the--some of the oldest law we have in the United 
States. It goes back to the time of Queen Elizabeth the 1st. 
South Carolina statute is actually the original Elizabethan 
statute.
    Fraudulent transfer law, it includes, it covers what is 
called actual fraudulent transfers. Those are transfers maybe 
hinder, delay, or defraud creditors, and the basic remedy for 
fraudulent transfers is rescission. You have to give back what 
you took, right, but that fails to create any disincentive to 
engage in fraudulent transfers. You get caught with your hands 
in the cookie jar--you took three cookies, the law says you 
have to put back three cookies, except what usually happens is 
a settlement. You took three cookies out and you settle, and 
you give one cookie back. You keep two cookies.
    So, I think that fraudulent transfer law needs a stronger 
remedy. It needs to probably have something like treble damages 
for actual fraudulent transfers. Additionally, there should 
probably be some light criminal penalty for actual fraudulent 
transfers because that will mean that attorneys cannot advise 
clients to do this transaction. They would have an ethical 
problem of doing it. Right now, attorneys are advising clients, 
yes, go ahead with the fraudulent transfer. It is not actually 
fraud, and they feel they can advise this. The divisive merger 
problem is a flavor of this. It is a feature of Texas and 
Delaware law that is being used to end-run fraudulent transfer 
law because Texas and Delaware law says certain transactions 
are not transfers even though--
    Mr. Jones. Professor, bankruptcy scholars, Macy and 
Solivera have proposed giving regulatory liabilities like 
environmental clean-up obligations top priority in Chapter 11 
proceedings. Could that proposal help?
    Mr. Levitin. That certainly could. It would help with one 
subset. It wouldn't help with every flavor of fraudulent 
transfer like Purdue, but certainly that would be an option.
    Mr. Jones. Thank you. My time is expired. I now recognize 
the gentleman from Florida, Mr. Steube, for five minutes.
    Mr. Steube. Thank you, Mr. Chair. It would be unwise for 
Congress to have a knee-jerk reaction to one or a handful of 
sympathetic cases in bankruptcy.
    With that in mind, my questions are to Professor Baird and 
Skeel. If you could speak further about the balances struck in 
Chapter 11 and how it generally does a good job and the dangers 
of changing the system based on one or two less than ideal 
outcomes would be dangerous for our country.
    Mr. Baird. If I could go first, the--
    Mr. Steube. Yes, go ahead.
    Mr. Baird. --bankruptcy code as designed in 1978 created an 
effective environment in which thousands of businesses have 
been able to reorganize. It tries to create an environment in 
which parties are brought together and it has had a remarkable 
track record.
    I think the challenge that you need to think about is not 
particular cases, not particular pathologies, but rather 
changes in the way, changes in financial structures, changes in 
the players--the bankruptcy process, innovations in the various 
devices like restructuring, support agreements, debtor in 
possession financing--that have evolved over time, and 
carefully assessing whether more regulation needs to be done to 
ensure the playing field is level and stays level.
    Mr. Steube. I would like to discuss the protections and 
safeguards already in place during Chapter 11 proceedings. As 
you mentioned in your testimony, much about the current system 
works very well. Can you talk further about how bankruptcy 
courts work to ensure that the creditors' interests are 
protected?
    Mr. Baird. The bankruptcy code has a number of substantive 
provisions. The 1129(A) lists the provisions that say this is 
what is required for the plan of reorganization. The bankruptcy 
judge has an independent obligation to review that list and 
ensure that these criteria are actually met. One of those 
criteria, for example, is something called the ``best interest 
test'' that requires that non-consenting creditors do at least 
as well in the bankruptcy as they would do outside of 
bankruptcy.
    Again, that is an example of a substantive provision that 
if the bankruptcy judge applies it rigorously will protect even 
those people who don't consent to the plan. That is one 
example. I could give others if you would like.
    Mr. Steube. Mr. Skeel, is there anything that you would 
like to add to that?
    Mr. Skeel. Thank you. I will just add a couple of things. I 
completely agree with everything that Professor Baird has said. 
A general comment I will make is that bankruptcy is designed to 
bring everything into the process. It is designed to reach a 
global resolution of the financial distress. It is much broader 
than prior law was. Under prior law, lots of things would fall 
between the cracks, and that doesn't happen anymore. In 
addition, there is an enormous amount of transparency in 
bankruptcy. The debtor basically has to open up all the drawers 
and cupboards and let everybody look at what is going on with 
the company.
    Finally, I would say that any time that the debtor does 
anything that is out of the ordinary course, anything unusual, 
there has to be notice and a hearing and an opportunity for 
creditors and other interested parties to object before it is 
approved. So, it is a very, very transparent process and on the 
whole it has been extraordinarily effective.
    Mr. Steube. Can both of you speak further about how Chapter 
11 reorganizations when conducted properly have the potential 
to preserve jobs by keeping companies afloat and in turn 
helping workers and workforce?
    Mr. Baird. I think if you simply look at vast areas of the 
economy, whether it is the retail industry or the airline 
industry, the automobile industry--I think it is unlikely 
General Motors or Chrysler would still be with us today if we 
didn't have an effective Chapter 11--you look at almost every 
major airline--American Airlines, United Airlines, Delta 
Airlines--they have all been through bankruptcy. Not simply the 
retailers you have heard of recently, but Bloomingdale's and 
Macy's also went through bankruptcy.
    Again, I wouldn't stop just with the large companies. There 
are lots of small companies that have reorganized successfully. 
The bipartisan introduction of Subchapter V two years ago has 
also facilitated small businesses who tried to reorganize 
during the pandemic. I think you could point to a lot of 
success stories.
    Mr. Skeel. Well, I will just add, I completely agree. Our 
system is better at preserving viable businesses when they are 
in distress, I think it is fair to say, than any other system 
in the world, and countries all over the world are trying to 
replicate the Chapter 11 process.
    Mr. Steube. Just quickly because I have only a couple 
seconds left, an issue that gets lost in this discussion, the 
role of bankruptcy judges. What would be the impact of 
legislation that limited judicial discretion?
    Mr. Baird. Well, as soon as you limit judicial discretion, 
when new things arise judges can have their hands tied. Now, 
sometimes hands-tying is a good thing. For a judge to be able 
to say, I just can't do that, may actually facilitate 
negotiations. As soon as you tell a judge, this is out of 
bounds--I think one of the failures of the Chandler Act, from 
Chapter X that was replaced, is that judges didn't have enough 
jurisdiction. They didn't have enough power to decide things, 
people went to other venues, and as a result, proceedings 
dragged out and many companies failed.
    One of the reforms of the 1978 Bankruptcy Code was to 
ensure that you could have one-stop shopping in which a judge 
would supervise the case, Act as a judge in the case, and would 
have jurisdiction over all the problems that arose in the case. 
To the extent you take that away, you are going to introduce 
problems.
    Mr. Steube. Thank you both for you time today. My time is 
expired.
    Mr. Cicilline. The gentleman's time is expired. I now 
recognize the gentleman from Maryland, Mr. Raskin, for five 
minutes.
    Votes have been called so we are going to try to squeeze in 
one on each side because I know Mr. Bentz has a scheduling 
issue too, so we will try to do that.
    You are recognized, Mr. Raskin.
    Mr. Raskin. Mr. Chair, thank you very much.
    Quick update here, the chances that the same three judges 
would be drawn 57 percent of the time out of 375 bankruptcy 
judges is basically one over infinity. I have two different 
mathematicians came back and said the number is too large to 
quantify.
    So, we need random assignment of the judges, so we don't 
get the bankruptcy debtors essentially picking their own judges 
or the judges picking their own cases for different reasons. 
So, again, I hope we can make this a bipartisan commitment on 
the Committee to move to random assignment. I have asked my 
staff to get going on that right away.
    Professor Levitin, back to you. What we have just heard in 
the last set of questions were very abstract and generalized 
statements about the virtues of bankruptcy. Of course, that 
doesn't go at all to this separate question of the 
nonconsensual, non-debtor provisions. When I listen to 
Witnesses, and I want to get to them quickly, so--but if you 
could answer quickly on this, is there anything to the idea 
that there is a benefit to allowing the judges the power to 
grant protection to non-creditors in a way that is 
nonconsensual to the victims of the underlying corporate 
misconduct?
    Mr. Levitin. No, absolutely not. I think it is, I cannot 
point to a case in which a debtor was unable, would have been 
unable to reorganize and would have to liquidate because there 
couldn't be a release of a non-debtor, right. The bankruptcy 
system works really well, generally, as Professors Baird and 
Skeel point out, but it doesn't require nonconsensual, non-
debtor releases to do its job. That is just a separate issue, 
the same way that we wouldn't allow a bankruptcy judge to grant 
a divorce of the debtor's owner or something like that.
    Mr. Raskin. Yes.
    Mr. Levitin. It is just outside of the lane of the 
bankruptcy court.
    Mr. Raskin. I mean when I first heard that it was even 
happening, I said that is not possible. It violates due 
process. How can they blockade my ability to sue a third party 
without ever hearing my case or my having my ability to state 
what happened? That is exactly what happened to Ms. Pleus and 
to Ms. Schwikert Moser.
    Ms. Pleus, I was moved by what you had to say that your 
family is politically active. I don't know if they are 
Democrats or Republicans or if you meant something else, but 
you said you didn't understand the rule of corporations. Here 
is Thomas Jefferson.

        I hope we shall crush in its birth the aristocracy of our 
        moneyed corporations which dare already to challenge our 
        government to a trial of strength, and to bid defiance to the 
        laws of their country.

    So, tell us again, Ms. Pleus, how did you feel your basic 
rights to due process were violated in your situation? Then I 
will give a minute to the other Witness.
    Ms. Pleus. Actually, I think it is important for people to 
know that the victims had no voice in the Purdue bankruptcy 
hearing. Unless you have tens of thousands of dollars available 
to you for private attorneys, which most of us do not have. We 
spent that keeping our kids alive--we could not bring a claim 
of our own. So, we are all lumped in together, represented by 
attorneys that we actually have no access to.
    We have no access to the process. We have no access to the 
attorneys. We don't know what our rights are. We receive 
packets of papers in the mail that I would probably need the 
professor to read for me. At Truth Pharma we have over 30 
families who have filed claims in the Purdue hearing and that 
is 30 families who are completely confused about the process 
and most likely will receive no funds as a result of this 
bankruptcy hearing.
    Mr. Raskin. I mean that is a tragic situation.
    Let me come to Ms. Schwikert Moser. How did the U.S. 
Olympic Committee get off scot-free when they weren't even a 
party to the proceeding, and you never had an opportunity to 
state your case against them?
    Ms. Schwikert Moser. To me, this is an overarching theme of 
freedom of choice. Just like what is happening right now in 
Tokyo with Simone Biles and Naomi Osaka they had a choice to 
prioritize their mental health. Not to go too far off-topic, I 
don't care if Simone Biles steps foot on the Olympic floor. She 
is and forever will be the greatest gymnast of all time, and I 
applaud the stand she took these past few days.
    To bring it back to the matter at hand, I and other 
survivors did not have a choice in the medical provider that 
USA Gymnastics and the Olympic Committee made us see. We should 
have a choice in how we seek justice against these non-bankrupt 
parties.
    I am not opposed to consensual releases and consensual 
settlements. I am opposed to cramming down releases. This 
legislation does not prevent agreed or consensual settlements. 
It is preventing forced ones. This legislation addresses the 
bailout by bankruptcy and abuse of process and allows these 
third parties to drag their feet and delay and prevent our 
ability to seek justice.
    So, to reiterate, I do not oppose third-party releases 
through the bankruptcy process. I oppose nonconsensual third-
party releases where victims like myself do not have a choice.
    Mr. Raskin. Because it is unconstitutional. I yield back to 
you, Mr. Chair. Thank you.
    Mr. Cicilline. Thank you, Mr. Raskin. I now recognize Mr. 
Bentz for five minutes.
    Mr. Bentz. Thank you, Mr. Chair. Very quickly, this is a 
question for Professor Baird. The court in the Purdue case 
decided that four billion was the most it could negotiate for, 
and I recall listening with some interest to reports and 
wondering why the number was so small.
    Can you explain why this number in your opinion was reached 
when, apparently, and what standard was being applied that 
resulted in such a modest sum given what we have heard today?
    Mr. Baird. Yes, I will answer the question, but I want to 
emphasize that I can't speak to the particulars of Purdue, but 
let me just explain what the challenge is for if you had an 
aggressive trustee or Committee going after the Sacklers. To 
recapture a dividend, you have to show the dividend was made at 
the time the firm was insolvent, and there is a four-year 
statute of limitations. So, it is transfers, the transfers that 
are vulnerable are transfers made within four years and you 
have to show that at the time of each transfer Purdue was 
insolvent.
    If Purdue had no financial debt, which to my understanding 
it did not, then you have to show when, at what moment in time 
the billions that Purdue had made and still had, weren't 
sufficiently large to cover the causes of action against them 
brought by States, brought by an individual, even though 
perhaps no suit to get them was filed.
    Again, I don't know the particulars, but you have to say, 
okay, in expectation, what was the financial condition of 
Purdue, and can you show that at the time each and every 
dividend was made it was within the statute of limitations and 
solvency was shown. Now again, that is a function of fraudulent 
conveyance law and fraudulent conveyance tools can be sharpened 
and so forth. Its statute of limitations can be extended.
    That is the technical problem that an independent 
aggressive party representing Purdue would face to try to 
recover with the Sacklers, and they end up with four billion, 
which is not a lot relative to their wealth. It appears that is 
the judgment they have made about that, given the uncertainties 
and litigation they face. Again, I can't speak to the 
particulars, but those are the types of technical challenges 
that would be encountered.
    Mr. Bentz. Thank you. I wish we had 45 minutes for me to 
ask you all the proper follow-up questions, but we don't.
    So, Attorney General Tong, you recently mentioned, about 30 
minutes ago, the fear--you were talking about the leverage that 
the Trustee and others enjoy, or the fear, is what you put it 
that the debtor or the third-party has in making whatever 
settlement it might choose to make. Frankly, I didn't quite 
catch the choices of what was worse. Can you please briefly 
explain what you were alluding to?
    Mr. Tong. Yes, and thank you for that question, 
Congressman. I can answer the previous question because I have 
been at the negotiating table all along in this process. The 
reason why the number is so small is because the Sacklers have 
known all along that they can get away with this. They have 
known all along that in their back pocket there is a very 
strong possibility in the Southern District of New York in 
Judge Drain's courtroom that they may get nonconsensual, non-
debtor releases.
    So, to be very candid, the Sacklers put a number on the 
table, roughly in the neighborhood of the number that is on the 
table right now, and they haven't moved over a couple of years 
of negotiation. They have stuck to this three- or four-billion-
dollar range because they knew they could hang there. They also 
knew that there was a very real risk that the court would go 
beyond the scope of the bankruptcy which should be focused on 
the debtor, on the company Purdue Pharma, and consider the 
Sacklers' interest when they are not debtors.
    This is the real problem, in going back to Ms. Pleus, the 
real problem with granting nonconsensual, non-debtor releases 
is we will never get to face the Sacklers in court. We will 
never put them on the stand, under oath, and go through the 
evidence. We will never put them on trial. We will never get 
the transparency that victims and States deserve. Instead, you 
have the Sacklers drafting behind, hiding behind the company 
Purdue Pharma and somebody said ``piggybacking,'' piggybacking 
their way to absolving themselves from liability.
    Mr. Bentz. Thank you. Mr. Chair, I yield back.
    Mr. Cicilline. The gentleman yields back. We will now stand 
in recess so we can vote, and we will resume immediately after 
votes and I ask for the indulgence of our Witnesses.
    [Whereupon, at 11:42 a.m., the Subcommittee recessed, to 
reconvene at 12:51 p.m., the same day.]
    Mr. Cicilline. Call the Committee back to order.
    I now recognize the gentlelady from Washington, Ms. 
Jayapal, for five minutes.
    Ms. Jayapal. Thank you, Mr. Chair, and thank you to our 
Witnesses.
    Our Bankruptcy Code presents a last resort to bring 
indebted businesses and their creditors to an agreement that is 
fair for all parties involved including workers, retirees, and 
their families. Non-debtor corporations and individuals have 
increasingly abused our Bankruptcy Code and relied on Chapter 
11 to insulate themselves and their fortunes from justice. From 
the opioid epidemic to product liabilities and sex abuse 
scandals, wrongdoers evade justice as their victims suffer.
    Ms. Schwikert Moser, thank you so much for your advocacy 
and your courage in helping generations of gymnasts like 
yourself to pursue justice against the U.S. Olympic and 
Paralympic Committee, USA Gymnastics after their failure to 
take sexual abuse allegations against Larry Nassar seriously, 
and holding everyone involved accountable.
    Like so many, I am proud to cheer for Team USA in Tokyo, 
but it breaks my heart that they have done everything we have 
asked of them; those tasked with protecting them from harm, 
from USA Gymnastics to the FBI, have failed to intervene. USA 
Gymnastics has proposed a new, 217-million-dollar bankruptcy 
settlement that 512 of the 517 attorneys representing survivors 
have said does not allow them to present proofs of specific 
harms.
    Why is it necessary for survivors to be able to present 
their harms individually?
    Ms. Schwikert Moser. The bankruptcy process, especially for 
non-debtors like the Olympic Committee, allows them to get away 
with horrific acts, right? So, I mean they picked the Olympic 
team doctor, Larry Nassar; he abused us. I was abused in the 
Olympics Stadium. They are allowed to come in and put little to 
no money in the pot and just escape liability.
    It all comes down to choice. I didn't have a choice on the 
medical provider that they made me use and I should have a 
choice in how I want to seek justice against the Olympic 
Committee. I also think bankruptcy allows them to hide behind 
the curtain. We will never find out what, where, when, why, who 
knew what with this whole tragedy that went down. As a 
survivor, and I believe I can speak for other survivors, we 
want answers.
    Ms. Jayapal. How important is it for you to be able to tell 
your personal story in the context of this?
    Ms. Schwikert Moser. Telling my personal story is 
obviously, every time I do it publicly it is very hard. Being 
vulnerable, especially when it comes to sexual abuse, is 
traumatic, but I can't change the past. So, if telling my story 
will help change the future, change laws to protect survivors 
in current and future generations, I am willing to do it.
    I also believe that telling my story personally is 
therapeutic and my goal is to leave my mark on this world and 
to leave a legacy, and if I can help change the bankruptcy laws 
to protect survivors and victims of the horrific things that 
third-party releases do to people, I am going to do it.
    Ms. Jayapal. I am so grateful to you for that, and I think 
that holding abusers and their enablers accountable is, it is 
how our justice system should work if we want to deter future 
instances of sexual abuse. When you and many others came 
forward and pressed charges, you did it with expectation of 
holding all bad actors accountable. Instead, without them 
declaring bankruptcy on their own, they have used USA 
Gymnastics bankruptcy proceedings to release themselves from 
liability.
    Would you explain how releasing actors like Steve Penny, 
the former National Team director, and U.S. Olympics Committee 
impacts your right to justice?
    Ms. Schwikert Moser. It doesn't give me a choice, right. I 
mean if, like I said earlier, I am not opposed to consensual 
releases. If the Olympic Committee and Steve Penny want to file 
for bankruptcy, then they can. They shouldn't be allowed to 
piggyback on the USA Gymnastics bankruptcy for pennies on the 
dollar given the liability they had in this situation and the 
responsibility to protect their athletes, and basically get off 
scot-free.
    Ms. Jayapal. Again, I am so grateful to you for speaking up 
and for making this a cause that you fight for.
    Professor Levitin, using Chapter 11 bankruptcy proceedings 
to immunize wrongdoers from lawsuits prevents the courts from 
understanding the full extent of harm to the many claimants and 
it protects the non-debtors' reputation as they move on 
unscathed to other endeavors without being held accountable.
    Is this how Chapter 11 is supposed to be used and if not, 
what is the intention of this bankruptcy process?
    Mr. Levitin. No, this is not how Chapter 11 is supposed to 
work and it is not how Chapter 11 used to work. Non-debtor 
releases were not a practice one saw in Chapter 11 until the 
Johns Manville asbestos bankruptcy and that case was an outlier 
for many years. Then Congress enacted a provision for non-
debtor releases specifically in asbestos cases, and those cases 
have some unique features that suggest that maybe they should 
be treated differently, but we have seen them expanded since 
and to the point that they are just standard practice now.
    So, it is not just a couple of cases that look bad, like 
Purdue and USA Gymnastics. It is the Boy Scouts. It is Harvey 
Weinstein. It is Catholic Church dioceses. It is Takata 
airbags. It is Dow Corning. This is a very standard thing. It 
is not just releases. It is also stays of non-debtors during 
the - of litigation against non-debtors during the course of 
the bankruptcy.
    Actually, there was a news headline yesterday in the Wall 
Street Journal. The Limetree Bay Refinery within St. Croix in 
the Virgin Islands. It rained--the refinery caused oil to 
actually rain down on St. Croix, poisoning the water source 
which is rainwater. They filed for bankruptcy in Houston not in 
the Virgin Islands, and now the private equity owners of the 
refinery are asking the court to stop litigation against them 
without having to file for bankruptcy themselves. So, this is a 
very common thing, unfortunately.
    Ms. Jayapal. Thank you. It really is outrageous. I am so 
grateful to you, Mr. Chair, for having this hearing. Thank you. 
I yield back.
    Mr. Cicilline. The gentlelady yields back.
    Ms. Dean. [Presiding.] The gentlelady's time has expired. 
The Chair now recognizes herself, myself, for five minutes of 
questions. I am very thankful for the Chair bringing this 
important hearing to us today. Part of this story is very 
personal to me.
    Ms. Pleus, I am very sorry about the loss of your son Jeff, 
and I know that doesn't take us very far, but I am certain the 
whole Committee wants to try to lift you up. My own son Harry 
is in long-term recovery from opioid use from addiction to 
opioids, eight years, almost nine months, but ours isn't 
everybody's story.
    As you point out in your own testimony, over the course of 
about 20 years, a little more than 20 years, 930,000 people 
have died. I am sure you are aware of the critical number last 
year. We were up from a high of 73,000 people dying of overdose 
to in 2020, during COVID, 93,331 lost souls. That is 255 people 
a day. I call that a jetliner a day.
    This country has to do something to ground that jetliner a 
day, and that is just the one who overdose and die. There are 
so many others who are struggling with this problem of 
addiction fueled, jet fueled as some of you have used the word, 
by the Sackler family and others for profit.
    So, I guess my first question is to say we have to humanize 
these numbers. Under the existing loopholes in bankruptcy law, 
those responsible for recklessly harming millions of Americans 
can continue to cause the harm. We are looking for 
accountability. We are looking for legislation that would make 
sure you and others get accountability. What, without our 
action, more Sackler families will do this again to others' 
harm.
    Can you tell us, what would any measure of accountability 
look like to you, to your family, to your community, to 
families like yours directly harmed by these bankruptcy 
loopholes?
    Ms. Pleus. Thank you so much and a huge congratulations to 
your son.
    Ms. Dean. Thank you.
    Ms. Pleus. It always gives me hope to hear about recovery. 
So, justice, what justice would look like to us is that 
treatment would be readily available, that the children who are 
left behind by this crisis without parents because they lost 
them to overdose would have funds that would help raise them, 
that would address the trauma that they went through living 
with parents who had substance use disorder. I know children 
who found their parents dead and these children have this 
trauma to carry the rest of their lives. No one is addressing 
these needs. This settlement is not even going to be able to 
touch the generational impact that we are going to see in this 
country as a result of what the Sacklers have done. Instead, 
what we are doing is moving this burden to the American people 
because the cost isn't going away.
    The cost is multigenerational. The cost to families like 
mine is grief for life. We can't--there is no fix for that. I 
never expected to receive any money. It has nothing to do with 
that. It is about justice, holding the Sacklers accountable for 
their direct actions in deceiving the American people to make a 
profit and now they are able to walk away with and put that 
burden that they have left with our society on the American 
taxpayers.
    Justice would look like the families that I know who have 
lost their homes, lost their retirement accounts, lost their 
children's lives, the Sacklers facing the same sort of fate for 
their horrific actions that they would also be suffering. They 
haven't suffered. They haven't even had to face families like 
mine.
    They have never had to be in front of anyone testifying. 
They don't have to take an oath of honor that they are going to 
tell the whole truth and nothing but the truth. They literally 
are allowed to walk away with their name intact.
    Ms. Dean. Pocketing billions.
    General Tong, in the remaining time that I have, I know you 
have worked with my own Attorney General Josh Shapiro of 
Pennsylvania on the Purdue Pharma resolution. Under the current 
bankruptcy laws following this month's resolution, what you 
talked about in your opening testimony, what does addressing 
this crisis look like? How will the funds be distributed? What 
legislative changes must we make?
    Mr. Tong. This is about treatment, prevention, and 
addiction science and thank you for starting with Ms. Pleus and 
her experience because this isn't just about money. It has 
never been about the money. We have, Josh Shapiro and I, the 
Attorney General for Pennsylvania and I and many other State 
Attorneys General have an obligation every day to pursue 
justice for victims like the Pleus family, like the Taylor 
family in Connecticut.
    I was telling Alexis over lunch I wish I could say that her 
story was uncommon or extreme.
    Ms. Dean. No.
    Mr. Tong. Mike Taylor was a young man who worked on my 
first campaign for elective office. He got a tennis injury. He 
played tennis at Villanova. Fell into addiction from taking 
opioids and we lost him. There are so many families like these 
in Pennsylvania and Connecticut and across the country.
    Ms. Dean. I see my time has expired. I thank you both and I 
will take the opportunity to continue the conversation offline, 
if I may.
    Mr. Tong. Thank you.
    Ms. Dean. I now recognize the gentleman from Wisconsin, Mr. 
Fitzgerald, for five minutes.
    Mr. Fitzgerald. Thank you, Madam Chair.
    Mr. Baird, one of the premise for some of the legislative 
proposals is that the bankruptcy process is broken and that the 
corporate bad actors oftentimes use the bankruptcies as to 
reduce wages, slash benefits, jettison pension allocations, I 
mean there is a long list, right, so some seem to think that 
every Chapter 11 filing automatically results in harm to 
workers or others because of the defects in the Bankruptcy 
Code.
    It seems to me the case is that the Code already has some 
protections for workers, and unhappiness with outcomes by any 
given stakeholder may be because of how or when a firm enters 
bankruptcy. Generally, no one is 100 percent happy with the 
plan, right, I mean that is kind of the idea. Could you 
describe at a high level what protections exist in the Code to 
ensure that workers' interest is accounted for?
    Mr. Baird. Well, Congress passed in the late 1980s, two 
provisions to Chapter 11, 1113, and 1114, and what they aspire 
to do is to create an environment in which the employer and 
those representing the workers can sit down and renegotiate 
deals that may need to be renegotiated, and imposes substantive 
standards that shows that renegotiations can be approved only 
when--collective bargaining agreements can be rejected only 
when it is necessary for an effective reorganization.
    Now, what we need to recognize is that whenever you put a 
powerful tool like that in place, it is capable of doing good 
and it is also capable of doing bad and we need to constantly 
revisit provisions like this. For example, there are some cases 
involving airlines where you have a combination between 
bankruptcy law and a special set of rules governing airline 
unions that may have produced some bad results.
    So, I think it is important to revisit these areas and I 
think we need to recognize that we do have strong provisions. 
They have enabled some collective bargaining agreements to be 
renegotiated, but it is a powerful tool, and like any other 
powerful tool we have to be vigilant.
    Mr. Fitzgerald. I don't want to put you on the spot, but 
also any examples where in the end jobs were saved and maybe 
the situation was clearly made better for some of the workers 
in the long run?
    Mr. Baird. Well, we have had steel cases where the pension 
obligations and so forth were such that, again, a lot of 
mistakes were made in the past, but the firm simply wasn't 
going to continue going forward unless there is a 
restructuring. We also look at the airline industry. The 
airline industry is an example where we had collective 
bargaining agreements renegotiated in United Airlines and other 
cases.
    In the automobile industry, many of the negotiations took 
place in the shadow of what might happen in bankruptcy. That is 
another example. Again, these examples tend to arise in 
industries when there has been a shift and somehow you are 
facing a different set of circumstances. Part of what 
bankruptcy does is face these new realities. It is hard stuff, 
and it is certainly subject to abuse, but I think you can point 
to these very large industries that are better off as a result 
of having these tools available.
    Mr. Fitzgerald. I mean at some point, there is going to be 
a judge and he is going to make a determination on stakeholders 
and oftentimes if one of those stakeholders is empowered more 
than the others, it tends to have an outcome that is not 
desirable all the time, so.
    Mr. Baird. It is the special responsibility of the judge to 
be vigilant and to pay meticulous attention to due process. 
When that doesn't happen in a particular case, it is extremely 
unfortunate.
    Mr. Fitzgerald. Thank you, Madam Chair. I yield back.
    Ms. Dean. The gentleman yields back. I now recognize the 
gentlewoman from Georgia, Ms. McBath, for five minutes.
    Ms. McBath. Thank you, Madam Chair. I want to thank each of 
you for being here today, and I especially want to thank Ms. 
Schwikert Moser and, also, Ms. Pleus. I just thank you so much 
for your bravery in coming forward to seek justice. Like so 
many Americans, I am just filled with pride in our nation's 
Olympic athletes and particularly Ms. Schwikert Moser. Your 
achievements are just even more impressive in light of the 
abuse that you and so many of your teammates faced and the ways 
in which you and your teammates actually just have continued to 
speak up and show true courage and leadership is really just a 
commitment to helping others along the way.
    Ms. Pleus, I know your fight all too well and I too am a 
mother who lost my son, so I know exactly the pain that you 
feel each and every single day and I can't thank you enough for 
the work that you are doing because you really are working to 
save lives and to make sure that no other parent is facing the 
immeasurable pain that you have faced.
    I have to say that I am really deeply troubled by the 
abuses that we have heard about today, particularly those that 
which the bankruptcy process has been used to avoid 
accountability for allowing sexual abuse to persist and for 
endangering people's lives.
    Ms. Pleus, I will start with you. When you started your 
advocacy work, I don't think you had any idea whatsoever that 
bankruptcy proceedings might pose just all these great hurdles 
and obstacles to your efforts. So, I know that you have covered 
a great deal today. I have heard your testimony. I have heard 
you this morning, but is there anything else that you have not 
been able to say that you want people to know right now how the 
system and these proceedings are failing families like yours 
from getting justice that you deserve?
    Ms. Pleus. Thank you so much. I appreciate that and I am 
sorry to hear of your loss as well. Yes, so the fact that the 
Sacklers never have to face a court themselves is really 
astounding to me. The fact that the Sacklers never have to face 
families like mine is astounding to me. When you hear the 
numbers that are quoted--930,000 people since 1999 and just 
last year, 93, over 93,000 lives lost in the United States--we 
get really lost in those numbers.
    The reality is, every single one of those people is 
attached to someone who loved them, and their story is 
important, and their loss is an incredible loss to our 
communities and our society. What we need is for the Sacklers 
to face that loss, to face those families, to hear those 
stories, and to see the suffering that they have caused and 
then for them to individually pay the price.
    The fact that they have been able to escape paying the 
price that they have put on the American people is just, it is 
absolutely horrific and there is no justice here.
    Ms. McBath. Thank you so much.
    Ms. Schwikert Moser, I am going to pose the same question 
to you as well.
    Ms. Schwikert Moser. I just, I want justice for the 
survivors and for the victims who, quite frankly, are hurt by 
this bankruptcy law. I want transparency and accountability by 
the Olympic Committee and USA Gymnastics. I no longer want to 
live in a world where USA Gymnastics and the Olympic Committee 
value medals and winning over the safety and well-being of its 
athletes.
    I think that is why it is so important that Simone Biles 
and Naomi Osaka withdrawing and taking the stance that they did 
at an Olympics or at a major international event to prioritize 
their mental health and well-being is so monumental. The safety 
of children and athletes should be the foremost, most important 
thing for these organizations.
    Again, I think this issue is broader than just gymnastics. 
We see the same issue in the Boy Scouts, the Catholic Diocese 
cases. Children are being abused and these organizations are 
not held accountable. There is no amount of money that I or any 
of the hundreds of other survivors would trade for the injuries 
that result from sexual abuse. Larry Nassar went to prison for 
his crimes, but what about the institutions who failed to 
protect us and failed their responsibilities and obligations to 
us?
    My lawsuits against the Olympic Committee and the lawsuits 
of the hundreds of other survivors will deter these failures 
from ever happening again. The civil justice system will work 
to prevent another serial pedophile from infiltrating these 
organizations because these organizations like the Olympic 
Committee will learn to Act more responsibly. The Olympic 
Committee should face liability regarding their direct claims 
and shouldn't escape liability through this bankruptcy 
loophole.
    Ms. McBath. Well, thank you to each of you for sharing your 
stories and I hope that our reforms can really help the many 
survivors and families that you represent. I am out of time. I 
yield back the balance of my time.
    Mr. Cicilline. The gentlelady yields back. I now recognize 
the distinguished Ranking Member of the Subcommittee, the 
gentleman from Colorado, Mr. Buck, for five minutes.
    Mr. Buck. I thank the Chair.
    General Tong, I wanted to ask you whether--and just if you 
would answer briefly, I would appreciate it--whether venue 
reform is part of the answer when we are talking about this 
non-debtor's release.
    Mr. Tong. Yes, absolutely. I think it will take a broader 
view of it.
    Mr. Buck. Professor Baird?
    Mr. Baird. I agree, absolutely. I think it is a hard issue, 
but having three judges decide this number of cases is not a 
sign that the system is working effectively.
    Mr. Buck. Professor Levitin?
    Mr. Levitin. Yes, I would agree.
    Mr. Buck. Last, Professor Skeel?
    Mr. Skeel. Yes, on this issue of the appointment of 
individual judges, I agree. It ought to be random within a 
district.
    Mr. Buck. I guess I would ask the four of you, briefly, 
perhaps going in reverse order this time, it is amazing to me 
that it is even constitutional. Does this not raise some sort 
of due process issues when we are talking about the--and I 
consider them victims. I don't consider them claimants of some 
kind.
    When the victims don't have the right to come forward in a 
more meaningful way, Professor Skeel?
    Mr. Skeel. I think it does potentially raise due process 
issues and there are a variety of ways you can go at it. 
Professor Levitin has suggested just banning all third-party 
releases or non-debtor releases. I think you could also 
consider a more middle of the road solution that allowed them 
in some circumstances but required that victims have their day 
in court.
    I think victims' ability to have a day in court is 
absolutely essential. So, both from constitutional 
perspective--I am not a constitutional expert, but it seems to 
me there are some issues there--and from a moral perspective, 
there absolutely are issues there.
    Mr. Buck. Mr. Baird?
    Mr. Baird. Due process is essential in bankruptcy court or 
anywhere else. If we are failing on that, that should be 
something you should change.
    Mr. Buck. Okay, legally?
    Mr. Baird. Yes. I think they are--
    Mr. Buck. I guess my question is, do we need to pass a law 
that tells a judge they need to comply with minimum due process 
requirements?
    Mr. Baird. Well, again, one of Professor Levitin's points, 
it is extremely hard to get appellate review in these 
situations. It shouldn't be necessary, of course, but the 
question is, is it within your power to do something here to 
ensure that there is more due process in the case of third-
party releases? It emphatically is.
    Mr. Buck. Well, those of us in Congress think everything is 
within our power, but hopefully there are people in the 
bankruptcy system who are listening today and understand the 
concerns that are being raised.
    Professor Levitin, your thoughts?
    Mr. Levitin. Yes. I think there is a constitutional problem 
here, and in the case of Purdue there is actually an objection 
filed by the United States Trustee supported by the Department 
of Justice challenging the constitutionality of the 
nonconsensual, non-debtor releases. This is the first time I am 
aware of that the United States Trustee has actually challenged 
non-debtor releases on a constitutionality ground.
    It is something that really needs to get decided, I think, 
at the circuit level, but, unfortunately, the bankruptcy court 
is very likely to confirm the release of the Sacklers and there 
is unlikely to be any sort of appellate review because of the 
equitable mootness doctrine.
    Mr. Buck. General Tong?
    Mr. Tong. Yes, I want to thank Professor Levitin for 
bringing that up because one of the reasons why the Trustee and 
the Department of Justice oppose these nonconsensual, non-
debtor releases is because we also have not just a 
constitutional problem but a federalism problem. As we all 
know, the Federal government, including its courts, the Federal 
Government is a government of limited powers, and they exercise 
the powers delegated to it by the states.
    The States, including the State of Colorado, the State of 
Rhode Island, the State of Connecticut, have retained our 
police powers to hold people like the Sacklers accountable, and 
no federal judge, as far as I know, and no bankruptcy judge has 
the power to dismiss a State's sovereign claim when exercising 
its police powers.
    That poses a real federalism challenge here and a 
constitutional problem when a Federal bankruptcy judge purports 
to dismiss or otherwise eliminate a State's sovereign power to 
protect its residents.
    Mr. Buck. I thank you. I didn't mean to ignore either Ms. 
Schwikert Moser or Ms. Pleus, but I wanted to get some of the 
legal issues out. I thank both of you very much for your 
testimony today and I know it is difficult and I can tell you 
that you are making a difference and I very much appreciate 
you. Thank you.
    Thank you and I yield back.
    Mr. Cicilline. The gentleman yields back. I, too, want to 
say again, thank you to our Witnesses, particularly the 
witnesses who traveled in person. I think this has been a 
really productive discussion and very valuable to the Members 
of the Committee. So, I want to say thank you again. Before we 
conclude, I just want to give you, Attorney General Tong, and 
you, Ms. Schwikert Moser, and you, Ms. Pleus, and Mr. Baird, 
kind of any final thoughts you might want to share with us 
before we conclude the hearing?
    Mr. Tong. Thank you, Mr. Chair. Let me just summarize by 
saying, you said in your opening remarks that one of our 
principal purposes here today and in our justice system is to 
pursue fairness. It is my job as a State Attorney General to 
pursue justice. It is also the job of a U.S. bankruptcy court 
to do justice. To let the Sacklers get off scot-free with a few 
billion-dollar payment that is less than five percent on their 
money every single year is not just, and it is not fair.
    I think at the end of the day, the reason why I oppose this 
proposed settlement is it is just not enough justice for all 
the victims, thousands upon thousands of victims across the 
country.
    Mr. Cicilline. Thank you very much.
    Ms. Schwikert Moser. Thank you, Chair.
    In summary, my direct claims against the Olympic Committee, 
with the current existing bankruptcy laws, it takes my direct 
claims away from me. The foundation of our Constitution 
includes due process and my right to a jury trial, and I am 
enraged that my constitutional rights are being violated as a 
result of the loophole of the existing bankruptcy laws.
    I have to believe that the Olympic Committee knows that 
these loopholes work in their favor and they are dragging their 
feet to resolve claims with the survivors that they injured. At 
this very moment, right now, the Olympic Committee is in Tokyo 
at the Olympics making money off the very athletes that they 
failed to protect.
    We did not have a choice in the medical provider that USA 
Gymnastics and the Olympic Committee made us see, and I do 
believe that we should have a choice in how we seek justice 
against these non-bankrupt parties.
    Mr. Cicilline. Thank you so much.
    Ms. Pleus. Thank you so much. One thing that I want to 
mention is that if we take too long with this reform it won't 
have an impact on the Purdue hearing at all. So, I appreciate 
being here today and I hope that we make a difference for other 
people in the future for similar issues. Because if we don't 
change the laws now, what we are sending is a clear message to 
all corporations that what they can do is lie to the American 
people, cause mass destruction, profit off it and go home with 
all of their money and be protected by the bankruptcy 
proceedings.
    So, even though this may not benefit the families who have 
been impacted by the Sacklers, I think it is important that we 
set this precedent. There is a chance though that you could 
also pass the SACKLER Act in time to impact the Purdue hearing, 
which I would love to see.
    Then the last thing that I wanted to mention is we have, it 
seems, two systems in the United States. One that applies to 
corporations and wealthy people and one that applies to the 
rest of us. We have a drug war that is raging on. My son spent 
time behind bars. Countless families have loved ones behind 
bars, and yet people like the Sacklers have caused countless 
deaths in the United States and are walking away, not only 
without time behind bars, but with the riches that they made as 
a result of it. I think that we as a nation need to figure out 
how we can change that, so that we don't have two separate 
systems in the United States, because that is not justice. 
Thank you so much.
    Mr. Cicilline. Thank you again.
    Professor Baird, any final thoughts?
    Mr. Baird. Well, I think this hearing has been very 
valuable and I think reminds us that our bankruptcy laws, as 
good as they may be, are in need of reform and vigilance is 
necessary and I am grateful for the chance to come and talk. I 
hope that as you think about these reforms we can continue to 
talk and we can continue to try to make the laws better.
    Mr. Cicilline. Great. Thank you so much.
    This concludes our hearing today. Thank you again to our 
distinguished witnesses. Without objection, all Members will 
have five legislative days to submit additional written 
questions for the Witnesses or additional materials for the 
record. I also seek unanimous consent to add a number of 
letters and statements regarding the proposals to repair our 
Bankruptcy Code discussed here today, for the record.
    [The information follows:]

                      MR. CICILLINE FOR THE RECORD

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    Mr. Cicilline. Without objection, so ordered. This hearing 
is adjourned.
    [Whereupon, at 1:25 p.m., the Subcommittee was adjourned.]
    

                                APPENDIX

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