Relevant Document:Agenda
At today’s hearing on the LTL Management debtor’s
request for a temporary restraining order barring the prosecution of talc-related claims in other courts against the debtor, nondebtor affiliates and certain other third-party defendants, Judge Craig Whitley granted the TRO only as to the LTL debtor and the entity formerly known as Johnson & Johnson Consumer Inc., or old JJCI, and
declined to issue the TRO as to Johnson & Johnson, any other affiliates or any retailers, distributors or insurers.
Judge Whitley noted that
testimony adduced at today’s hearing gave him “grave concerns” as to whether J&J itself may have talc-related liability independent of old JJCI and the debtor, highlighting the “troubling” fact that the debtor and J&J have yet to identify documents to definitely support their assertion that the debtor and old JJCI are solely responsible for all talc-related claims. The judge further observed that the debtor seems to have been “rushed and unprepared” in its efforts to obtain a TRO, adding that it is “not ideal” for him to be asked to consider the request “on such short notice” and with such urgency, as compared to other similarly situated “Texas two-step” debtors DBMP and Aldrich Pump, which he said sought
similar injunctions on a less expedited timeline.
Judge Whitley went on to comment more broadly on the “Texas two-step” chapter 11 strategy, which he believes his court is the only court to address thus far. “My preliminary opinion,” said the judge, is that the strategy gives rise to “colorable claims,” referring to his Oct. 14
ruling granting the DBMP asbestos claimants’ motion for derivative standing to challenge the divisional merger in that case. Such transactions, the judge continued, are either a “brilliant strategy” allowing a corporation to access the bankruptcy code’s mass tort channeling injunction provisions without subjecting the entire enterprise to chapter 11 or a “manifestly unfair” maneuver detrimental to plaintiffs.
“Which is it? I can’t tell you” based on the “rushed and unprepared circumstances” today, the judge concluded.
Judge Whitley emphasized that his ruling is “for today” and for the next 14 days and that he will consider further or different relief at the continued hearing on Nov. 4. Earlier in the hearing, the court and parties left open whether the Nov. 4 hearing would be a hearing on a preliminary injunction or, instead, a hearing on whether to extend any TRO.
Today’s proceedings focused on oppositions to the requested TRO. The debtor
argued in favor of the TRO at the Oct. 20 first day hearing. Several plaintiffs’ counsel observed today that the debtor’s list of “protected parties” sought to be protected by the TRO “ballooned” to over 700 as compared to a much shorter list of approximately 150 attached to the
stay motion.
Melanie Cyganowski and Adam Silverstein of Otterbourg appeared for the talc plaintiff
steering committee, or PSC, appointed in the MDL. Cyganowski challenged the “unprecedented expansion of the automatic stay” sought by the debtors and argued that the expedited manner in which the debtor has been proceeding indicates its “bad faith,” noting that the debtor produced certain documents requested at the first day hearing last night, Oct. 21. She added that J&J’s “incredible solvency” distinguishes this case from other “Texas two-step” cases.
Silverstein similarly argued that the case has a “different script” from the DBMP and Aldrich Pump cases, with a “more sinister” “plot line.” In contrast to those cases, where he said claimants have access to the “same assets” as before the divisional mergers, J&J is “not putting all of its chips on the table.” Silverstein compared the value of JJCI, which he asserted to be approximately $14.1 billion, to that of J&J, which he said has a market capitalization of approximately $431 billion.
Counsel for various plaintiff groups cross-examined the debtor’s witness, John Kim, the debtor’s chief legal officer. Questioning focused primarily on whether J&J itself holds direct liability on talc-related claims independent of old JJCI and the debtor.
Kim conceded that the debtor and J&J have been unable to locate documentation to support the debtor’s assertion that old JJCI has in fact assumed all of J&J’s talc liability, as asserted by the debtor. Kim’s declaration in support of the TRO attached J&J board minutes from 1978 authorizing the transfer, but despite searching, he said the company has been unable to identify instruments actually documenting the transaction. Kim pointed to the board minutes as evidence that the assumption took place and added that, “from a practical standpoint,” that is how the company has operated.
In addition, plaintiffs’ counsel introduced jury verdict sheets from various talc cases separately identifying J&J and JJCI as defendants and questioned Kim on a talc-containing product called “Shower to Shower,” formerly sold by the company. Counsel suggested that the Shower-to-Shower liabilities may not have been assumed by old JJCI as a J&J “baby product” as contended by the company.