Wed 11/10/2021 17:34 PM
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At a hearing today, Judge Craig Whitley ordered that the LTL Management debtor’s chapter 11 case be transferred to the District of New Jersey, as requested by the bankruptcy administrator, the plaintiff steering committee in the New Jersey talc multidistrict litigation, or PSC, and other parties. Immediately following his venue ruling, however, the judge granted the debtor’s request for an extension of the automatic stay and a preliminary injunction barring talc litigation, for 60 days only, against Johnson & Johnson and the other “protected parties” requested by the debtor, including certain affiliates and retailers.

The court held a two-day hearing on the injunction request last week and indicated he would issue his ruling following today’s hearing on venue. The judge had earlier in the case declined to halt litigation against J&J and the debtor’s lengthy “protected party” list, limiting his Oct. 22 temporary restraining order to LTL and the entity formerly known as Johnson & Johnson Consumer Inc., or old JJCI.

Today’s ruling will temporarily shield all of the parties requested by the debtor from talc-related litigation for a period of 60 days. In light of his ruling transferring the case to the New Jersey court, Judge Whitley remarked that “the last thing I want to do is send it on fire.” The temporary stay will allow the New Jersey bankruptcy court an opportunity to consider the propriety of a further injunction under applicable Third Circuit law, observed the judge. “I do not wish to bind” the hands of that court, he added. In barring claims against all of the “protected parties,” the judge acknowledged that he is “painting with a very broad brush,” and noted that opponents will have a further opportunity to argue their case in the New Jersey court.

As to the merits of the debtor’s requested extension of the automatic stay and injunction, Judge Whitley said that he is “adopting most” of the debtor’s arguments and concluded that claims against the “protected parties” are “effectively claims against the debtor” that would “conceivably have an effect on the estate.” Based on the 1979 transfer agreement, said the judge, talc claims against J&J arising prior to 1979 appear to have been transferred to old JJCI and, by virtue of the divisional merger, to the debtor. Claims arising after that, he continued, would constitute claims based on the conduct of old JJCI.

In ordering the venue transfer over the debtor’s objection, Judge Whitley concluded that a transfer to New Jersey is the “natural decision” given that “all the connections are there,” noting that J&J and JJCI are located in New Jersey, as are their employees and the pending multidistrict litigation, or MDL. Although the court did not “fault” the debtor for filing the case in North Carolina given the Charlotte court’s “expertise” with divisional merger cases, he said that LTL’s limited connections to the state are “not enough to get us there.”

Judge Whitley added that his court has no particular expertise “that could not be easily replicated” by the New Jersey court, which he noted has extensive experience dealing with asbestos cases. As to judicial resource concerns, which the judge highlighted at the first day hearing and in his order to show cause why venue should not be transferred, Judge Whitley said today that such concerns were “the least of the considerations for changing venue” but acknowledged the strain continuing the case in Charlotte would have on his court.

In rejecting certain parties’ urgings that the case be transferred to Delaware, Judge Whitley found New Jersey to be the “more natural fit,” noting potential opportunities for the bankruptcy court and the New Jersey federal district court overseeing the MDL to coordinate or provide assistance on their respective proceedings.

Today’s venue hearing commenced with opening arguments from the various proponents for venue transfer, beginning with bankruptcy administrator Shelley Abel, who argued that the question of whether to transfer the case is “not close,” highlighting the “overwhelming amount of support” for a transfer by the debtor’s creditors. Addressing the debtor’s focus on the court’s chapter 11 divisional merger experience, Abel remarked that “flattery was their only play.” Abel pressed for a transfer to New Jersey but, later in the hearing, told the court the case should be “anywhere but here.”

Melanie Cyganowski of Otterbourg for the PSC also pressed for a transfer to New Jersey, arguing that the New Jersey bankruptcy court is fully capable of handling the case. Whether or not that court has the same level of experience on divisional merger cases is “not a factor” in deciding a venue transfer, she added. On the contrary, said Cyganowski, having “fresh eyes” on “Texas two-step” cases would benefit the litigants and the judicial process.

Adam Silverstein of Otterbourg argued that, in contrast to certain debtors’ venue selections based on a court’s “organic expertise” - such as the Delaware court’s experience with large business cases generally and the Texas courts’ experience with oil and gas cases - which he called the result of “natural selection,” LTL chose to incorporate in North Carolina “solely” to file bankruptcy in this court to “take advantage of perceived favorable rulings” in similar cases, which he called “unnatural selection.”

Numerous talc plaintiffs’ counsel likewise spoke up in favor of a transfer to New Jersey. Certain parties, however, advocated for Delaware, including plaintiff firm Arnold & Itkin represented by Laura Davis Jones of Pachulski. Jones argued that Delaware is the “most appropriate” venue based on the debtor’s and J&J’s “entanglements” with the chapter 11 cases of Imerys Talc America and Cyprus Mines, which she called “very large if not the two largest” creditors in LTL’s case.

Jeff Bjork of Latham & Watkins appeared on behalf of the Imerys debtors. Although Imerys takes no position on whether LTL’s case should be transferred, said Bjork, “please don’t send it to Delaware.” He said that transferring the case to Delaware would provide “no benefit” to the Imerys debtors, adding that the Imerys debtors do not see a need to resolve their pending adversary proceeding with J&J over its indemnification obligations in order to confirm a plan.

Debtor’s counsel Gregory Gordon of Jones Day argued against a venue transfer, asserting that the Charlotte court’s experience with divisional merger cases should be “determinative” of the question and urging the court to defer to the debtor’s selection of venue. Gordon also suggested that transfer proponents are actually motivated by a desire to eventually seek dismissal of the debtor’s case and believe their dismissal arguments may fare better under Third Circuit law in either New Jersey or Delaware.
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