Mon 09/20/2021 18:31 PM
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Relevant Document:
Opinion and Order

This afternoon New Jersey Superior Court Judge John Porto entered an opinion and order denying two talc claimants’ motion for a temporary restraining order or preliminary injunction barring Johnson & Johnson from undertaking a “Texas two-step” divisional merger and chapter 11 filing to shed talc liabilities.

The claimants argued that a Texas divisional merger separating Johnson & Johnson’s assets from its talc liabilities would violate New Jersey's Uniform Voidable Transactions Act, and emergency relief was required to maintain the status quo pending trial on their talc claims. However, Judge Porto concludes that “[a]t this time, and on this record,” the claimants “did not identify or convince this Court by clear and convincing evidence there was any actual fraudulent transfer that was consummated or transacted by the Defendants or that the Plaintiffs would suffer any immediate irreparable harm.”

Judge Porto specifically finds that while the claimants “speculate on a potential divisive merger that would separate Defendants' talc-related liabilities from their productive assets,” the New Jersey voidable transaction statute only applies retrospectively, after a potentially avoidable transfer occurs. The claimants ask the court “to assume the Defendants intend to conduct a fraudulent transaction,” the judge says, but he “cannot make that leap.”

“The Court finds the correct focus must be based on more than just speculative reliance on news reports or conjecture coupled with a suspect corporate transaction,” the opinion reads. “As to future potential transactions, Plaintiffs did not introduce any clear and convincing proof the Defendants decided to undertake any actual ‘Texas two-Step’ transaction nor did they present the terms of an actual transaction that would undermine the present situation or disrupt the status quo.”

As of now, Judge Porto continues, Johnson & Johnson remains solvent, and thus the claimants’ damages claims constitute an “adequate remedy at law” sufficient to justify denial of an injunction.

Judge Porto further agrees with Johnson & Johnson that “plaintiffs cannot usurp the corporate decision-making of large companies merely by filing tort claims and then hypothesizing about the potential harm they could suffer from one or more theoretical future corporate transactions.” The requested injunction “would hamper J&J and JJCI's ability to carry out a host of ordinary-course business transactions that would harm the boards’ and management's ability to carry out their fiduciary duties to shareholders,” the judge finds - a harm that outweighs any threatened harm to the claimants.

Judge Laurie Silverstein denied a request for a similar injunction in the Imerys Talc chapter 11 on Aug. 26, though that request was based on the automatic stay in Imerys’ bankruptcy rather than state fraudulent transfer law.
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