A bankruptcy judge ruled on Thursday that Johnson & Johnson’s third Chapter 11 case to resolve thousands of talcum powder lawsuits would remain in Texas.
In an order from the bench, U.S. Bankruptcy Judge Christopher Lopez, of the Southern District of Texas, found no compelling reasons to send the Chapter 11 case to the District of New Jersey, where U.S. Chief Bankruptcy Judge Michael Kaplan oversaw the first two Johnson & Johnson talc bankruptcies.
He said the case before him, filed on Sept. 20 by Johnson & Johnson subsidiary Red River Talc, was not the same as the two prior talc bankruptcies. Those were filed by another Johnson & Johnson subsidiary, LTL Management. And, in this case, he said, Johnson & Johnson claimed to have the support of 83% of talc claimants for its prepackaged bankruptcy plan, which includes a $9 billion compensation proposal.
“There’s no question Judge Kaplan, in my mind a brilliant judge, has an intimate and vast knowledge of the prior case, but he also recognized that we have in this case clearly different debtors, different parties involved,” Lopez said after lengthy oral arguments on Thursday. “I know just about as much about this case and this plan as any other judge in the country.”
A group called the Coalition of Counsel for Justice for Talc Claimants, and the U.S. Trustee in Houston, had argued to send the bankruptcy to New Jersey, insisting that Johnson & Johnson was venue shopping to avoid the U.S. Court of Appeals for the Third Circuit, which dismissed its two prior talc bankruptcies.
“This type of forum shopping is not OK,” said Sunni Beville, of Otterbourg, for the coalition, during Thursday’s oral arguments. “Abusive forum shopping is not about creditor support.”
But Red River and an Ad Hoc Committee of Supporting Counsel opposed the move to transfer the venue.
Greg Gordon, of Jones Day in Dallas, who represents Red River, told Lopez that the opposition was coming from a minority of plaintiffs firms.
“Their ultimate goal is, or their ultimate view is, they don’t think this plan should be allowed to go forward in any bankruptcy forum, and they want to be in New Jersey because they think that maximizes their prospects for obtaining dismissal of the case, notwithstanding the widespread agreement that exists to the proposal that’s embedded in the plan,” Gordon said at Thursday’s hearing.
In a statement following Lopez’s decision, Johnson & Johnson Worldwide Vice President of Litigation Erik Haas said, “Judge Lopez correctly ruled that Red River’s prepackaged bankruptcy shall remain in Texas, where Red River is incorporated, where its assets are located, and where the claimants whose interests are at issue selected as the appropriate forum.”
In a statement, Beasley Allen principal Andy Birchfield, in Montgomery, Alabama, said the Chapter 11 case “remains a flawed bankruptcy that abuses the bankruptcy system.”
“Going forward,” he said, “we will provide evidence to the court illustrating many examples of deceit, deficiencies, and discrepancies of the vote administered by J&J and the precedent rulings against such a third-party liability release. Together with other members of the opposing coalition, we believe this third attempt at bankruptcy again fails to meet the standards of the bankruptcy code.”
Lopez, who imposed an automatic stay in the Chapter 11 case until Oct. 11 to sort out the venue issue, said he planned to move quickly to address numerous arguments in the case.
“There’s real people behind it who really want a settlement, and really want money, and there are folks who want their day in court in another jurisdiction,” Lopez said. “I’m feeling it all, and the weight of it all. But I’m confident I reached the right decision.”