Attorneys from Paul Weiss Rifkind Wharton & Garrison LLP led Rite Aid through its second reorganization in two years and won approval for the sale of DNA testing company 23andMe over the objections of state regulators, earning the firm a place among the 2025 Law360 Bankruptcy Groups of the Year.
The firm also handled the $8 billion bankruptcy of Diamond Sports Inc. and won a pair of circuit court appeals relating to uptier transactions — one representing debtor Mitel and one representing a lender excluded from a liability management transaction by Serta.
Paul Weiss attorneys had a long history with the Rite Aid case because they had represented creditors of the company in the pharmacy chain's 2023 bankruptcy. Those creditors ended up in possession of the company through a debt-equity swap, but financial and operational challenges persisted, especially on the retail side of the business, and the company filed a "Chapter 22" in May 2025, less than a year after the first plan confirmation.
The Chapter 22 presented challenges including "lender fatigue" as well as fatigue from employees, who "had been living in an environment of financial distress," partner Alice Eaton told Law360.
Starting out with the aim of disposing of Rite Aid's assets to pay down debt, the team focused on a part of the business that seemed more viable, namely the "back-office" pharmacy, or the part of the pharmacy business consisting of filling prescriptions, sans the retail side.
Rite-Aid sold the prescriptions themselves to competitors such as CVS and Walgreens. That was not without its own challenges, however, because of the high stakes of getting medications to patients who rely on them.
"We managed to sell the prescriptions without a single incident of delay or problems," Eaton said.
The debtor handed supplier and trade creditor McKesson the keys to the reorganized Rite-Aid and emerged from bankruptcy Dec. 31 "with minutes to spare," she said.
Another major case for the firm was the Chapter 11 case of genetic testing company 23andMe, which "became quite a lightning rod in Congress," partner Paul Basta said, as the potential sale of the company's main assets — customers' genetic data — raised privacy fears.
In one of the first bankruptcies involving such an asset, 23andMe fielded objections from state attorneys general to a planned sale to a nonprofit controlled by 23andMe shareholder Anne Wojcicki.
"Privacy laws prohibit companies from transferring an individual's genetic data, but they don't prevent changes in ownership as long as the new owner agrees with the privacy policy," Basta said.
The states took the position that the sale was a transfer of genetic data, while 23andMe argued that it was the equity of the company owning the genetic data that was being transferred, with the privacy policy unchanged. The court agreed with the company, finding state privacy laws did not apply — and the continuity in ownership helped, Basta said.
"The judge felt the result was particularly fair because it was the same owner, and as a practical matter I don't think the consumer is in a worse position," he told Law360.
The case, filed in March 2025, was also an important opportunity for junior attorneys' development, Basta added, noting that associates Grace C. Hotz, Jessica I. Choi and Lauren Castillo did a significant portion of the work in the case and had "great interactions with the court."
Another significant challenge was the Chapter 11 bankruptcy of Diamond Sports Group, which began in 2023 and concluded in January 2025. The sports broadcasting company was not merely $8 billion in debt — of which it clawed back nearly $500 million through a fraudulent conveyance suit against parent Sinclair Inc. — but also had an antiquated business model based on customers paying for cable in order to watch sports.
"You had to fix not only the balance sheet but fix the business, especially an industry that's going through so much change," partner Brian Hermann said.
The solution was pivoting from television to a streaming deal with Amazon, which helped the company face the NHL, MLB and NBA in broadcast rights negotiations with surer footing.
"In order to move from a legacy cable business to a streaming business, we needed a partner that gave us a lot of credibility with the leagues and the teams," Hermann said. "It gave us credibility with the judge that we had a viable business with Amazon."
It also inked a naming rights deal with gambling company FanDuel, which gave it "a little more panache," he added.
The 70-lawyer bankruptcy department — mostly based in New York, but with a growing London contingent — also prides itself on bankruptcy litigation, Hermann added.
In addition to suing Sinclair in the Diamond Sports bankruptcy and obtaining a $495 million mediation judgment, the firm won favorable decisions in two appellate cases stemming from liability management transactions. In December 2024, the Fifth Circuit struck down Serta Simmons Bedding's 2020 uptier transaction, siding with lenders excluded from the uptier. At the same time, the Appellate Division of the New York Supreme Court dismissed challenges to telecom Mitel's 2022 uptier.
The practice has adopted a strategy of cultivating a diverse practice with a mix of debtor- and creditor-side work and transactions outside of court, Basta said.
"We're one of the firms that has a very balanced practice; we try to solve whatever problem we can solve," he said. "We try to organize ourselves to be responsive to whatever the market needs."
Jan 29
Deal Summary
