No J&J Talc Trials For 60 Days, Bankruptcy Judge Rules
By: Enrique Serna
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No J&J Talc Trials For 60 Days, Bankruptcy Judge Rules
Written By: Vince Sullivan
Re-posted from Law360 (April 20, 2023, 12:52 PM EDT) — A New Jersey bankruptcy judge issued a limited preliminary injunction Thursday in the Chapter 11 case of Johnson & Johnson‘s bankrupt talc unit, saying that litigation against the parent company and other nondebtor entities can continue up to the trial stage until mid-June.
In a virtual bench ruling, U.S. Bankruptcy Judge Michael B. Kaplan said the temporary restraining order that has been in place since LTL Management LLC filed for its second bankruptcy case April 4 should be reined in by allowing discovery and pretrial matters to go forward in the thousands of pending talc cases.
“The preliminary injunction will prohibit commencement or continuation of any trial against any of the protected parties identified in the [adversary] complaints, through June 15 of 2023, a period of approximately 60 days,” Judge Kaplan said. “This is aimed at preventing the liquidation of claims for which this debtor may have liability, with the liquidation occurring outside this bankruptcy.”
The court is not enjoining the filing of new complaints against the nondebtor parties, or staying any procedural matters in cases that are currently underway.
The temporary restraining order in effect in multidistrict litigation pending before a New Jersey federal judge will remain in place with the agreement of the presiding judge, Judge Kaplan said.
The automatic stay triggered by the filing of the bankruptcy petition will continue to bar any litigation against LTL itself.
At a hearing earlier this week on the debtor’s motion for the injunction and an expansion of the automatic stay to J&J and other nondebtors, talc claimants argued that LTL was not likely to succeed in its efforts to reorganize through an $8.9 billion settlement fund for present and future talc claims.
Judge Kaplan said it was not possible to reach a determination on this likelihood without further evidence, which he expects to receive through anticipated motions to dismiss from the talc claimants committee and other plaintiffs attorneys.
“The court cannot reach a determination there is no possibility of a successful reorganization based on the claimant objections, vehement as they may be,” Judge Kaplan said. “The court is skeptical and will require a well-supported and timely showing of the debtor that this reorganization has a meaningful chance.”
J&J said after the ruling that it was a win for claimants, who are closer to seeing a resolution to their cases and will have the opportunity to vote on a to-be-filed Chapter 11 plan that is the only method for equitable relief.
The plan has the support of more than a dozen plaintiff firms representing at least 60,000 talc claimants, Erik Haas, J&J worldwide vice president of litigation, said in a statement, but other firms with a larger financial stake in the outcome of the litigation are expected to continue their opposition.
“Despite this support, we expect a few plaintiffs’ law firms will continue to oppose and seek to delay this plan,” Haas said. “The evidence presented to the court this week shows that these firms have a profit motive to remain in the tort system that is at odds with the interests of their clients. When presented with a clear and complete explanation and the opportunity to make an informed choice, we firmly believe the claimants will approve the plan.”
Leigh O’Dell of Beasley Allen, which co-chairs the plaintiff steering committee in the multidistrict litigation, said while the court’s ruling grants some relief to claimants, many of them women, they will continue to suffer from added delay in having their day in the tort system to seek recovery for the illnesses they assert were caused by J&J’s talc products.
“As allowed by this court’s order, we will file claims, pursue discovery, and make every effort to advance our clients’ interests, but in the absence of trials, the pressure on J&J to do the right thing is limited,” O’Dell said in a statement. “We continue to believe this bankruptcy is illegitimate, that the civil courts remain the venue to resolve civil claims, and that stance will be affirmed through the appellate process.”
Judge Kaplan urged the parties to continue discussions around settling the opposition to the plan and asked the debtor and the official committee of talc claimants to submit a confidential list of three names for people who could serve as mediators in the case.
“I have not altered my view that mediation is important and, indeed, considering the debtor’s intention to file a plan in short order, I believe mediation is critical and must begin soon,” Judge Kaplan said.
LTL Management filed for bankruptcy the first time in October 2021, just days after the entity was created via the controversial divisional merger transaction that’s part of the so-called Texas Two-Step maneuver. J&J created the debtor to hold potentially billions of dollars of liability related to ovarian cancer and mesothelioma claims arising from exposure to J&J’s cosmetic talc products, including Johnson’s Baby Powder and Shower to Shower powder. The claimants allege the products contain poisonous asbestos.
J&J and LTL maintain that their products are safe, do not contain asbestos and do not cause cancer or other serious illnesses.
LTL’s second bankruptcy began April 4, hours after the first case was dismissed at the order of the Third Circuit based on its ruling the debtor was not in financial distress.
LTL is represented by Gregory M. Gordon, Dan B. Prieto, Amanda S. Rush and Brad B. Erens of Jones Day, and Paul R. DeFilippo of Wollmuth Maher & Deutsch LLP.
The official committee of talc claimants is represented by Daniel M. Stolz, Donald W. Clarke and Matthew I.W. Baker of Genova Burns LLC, David J. Molton, Robert J. Stark, Jeffrey L. Jonas, Michael Winograd, Eric R. Goodman and Sunni P. Beville of Brown Rudnick LLP, Melanie L. Cyganowski, Adam C. Silverstein and Jennifer S. Feeney of Otterbourg PC, and Jonathan S. Massey of Massey & Gail LLP.
The case is In re: LTL Management LLC, case number 3:23-bk-12825, in the U.S. Bankruptcy Court for the District of New Jersey.
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