{"id":5033,"date":"2025-04-02T01:44:39","date_gmt":"2025-04-02T01:44:39","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/texas-judge-dismissed-jjs-third-talc-bankruptcy-citing-significant-voting-irregularities\/"},"modified":"2025-04-02T01:44:39","modified_gmt":"2025-04-02T01:44:39","slug":"texas-judge-dismissed-jjs-third-talc-bankruptcy-citing-significant-voting-irregularities","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/texas-judge-dismissed-jjs-third-talc-bankruptcy-citing-significant-voting-irregularities\/","title":{"rendered":"Texas Judge Dismissed J&J\u2019s Third Talc Bankruptcy, Citing ‘Significant’ Voting Irregularities"},"content":{"rendered":"\n
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A judge dismissed Johnson & Johnson\u2019s third talc bankruptcy after finding \u201csignificant voting and solicitation irregularities\u201d in about half of the votes supporting the proposed $10 billion Chapter 11 confirmation plan.<\/p>\n<\/div>\n

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Unlike the two prior Chapter 11 cases filed by Johnson & Johnson subsidiary LTL Management, U.S. Bankruptcy Judge Christopher Lopez, of the Southern District of Texas, spilled little ink on the financial distress of Red River Talc or the controversial \u201cTexas two-step\u201d merger procedure that created the new debtor.<\/p>\n<\/div>\n

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Instead, the judge focused heavily on the voting process and, in particular, the means by which several plaintiffs\u2019 firms cast master ballots on behalf of thousands of clients. Unlike in the past two talc bankruptcies, numerous plaintiffs\u2019 firms jumped aboard in support of the plan. At a hearing that wrapped up a month ago, many of those lawyers testified that they had relied on engagement letters that allowed them to vote for thousands of clients who hadn\u2019t responded by the deadline.<\/p>\n<\/div>\n

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But Lopez concluded that was one of several \u201csignificant voting and solicitation irregularities\u201d that doomed the plan.<\/p>\n<\/div>\n

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\u201cPlaintiffs\u2019 firms voted tens of thousands of claims without either hearing directly from their clients or having the requisite authority to do so,\u201d he wrote in Monday\u2019s dismissal order. \u201cThe prepetition voting and solicitation history and related issues raised serious questions about whether this case should have started.\u201d<\/p>\n<\/div>\n

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Even if the voting issues could be cured through a re-solicitation process, Lopez found other problems with the talc bankruptcy, such as an injunction order against hundreds of retailers and Kenvue, Johnson & Johnson\u2019s newly created subsidiary that is responsible for talc liabilities, and the potential hurdle of the U.S. Supreme Court\u2019s 2024 decision in Harrington v. Purdue Pharma<\/i>, which overturned nonconsensual third-party releases<\/u><\/a> in Purdue Pharma\u2019s $6 billion bankruptcy plan.\u00a0<\/a><\/p>\n<\/div>\n

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He called on the parties to reach a resolution, noting that the latest version of the plan contemplated an out-of-court deal if it wasn\u2019t confirmed by the Fifth Circuit.<\/p>\n<\/div>\n

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\u201cWhile the court\u2019s decision is not an easy one, it is the right one,\u201d Lopez wrote. \u201cThe court hopes something gets done for J&J, Red River, and claimants who also want finality on their cases.\u201d<\/p>\n<\/div>\n

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In a statement, however, Johnson & Johnson said it had no intent to settle and reversed the $7 billion reserved for the bankruptcy plan, calling the talc litigation \u201ca plaintiff-lawyer driven fake tort, premised on junk science and fueled by third party litigation financing including from foreign sovereign wealth funds.\u201d<\/p>\n<\/div>\n

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\u201cThe court has unfortunately allowed a couple of law firms with financially conflicted motives, who have conceded they have not recovered a dime for their clients in a decade of litigation, to defeat the overwhelming desire of claimants,\u201d Erik Haas, Johnson & Johnson\u2019s worldwide vice president of litigation, said in a statement. \u201cAs we have repeatedly stated, in the absence of plan confirmation, we will vigorously present our case in the tort system.\u201d<\/p>\n<\/div>\n

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The Coalition of Counsel for Justice for Talc Claimants had objected to the bankruptcy, along with Travelers Casualty and Surety Co. and a lawyer for the U.S. Trustee\u2019s Office. Adam Silverstein, of New York\u2019s Otterbourg, a lawyer for the coalition said, \u201cJ&J tried to wear down victims through delay tactics, legal loopholes, and backroom deals. Today\u2019s ruling shuts down that abuse and ensures that real people\u2014not corporate executives\u2014will decide what justice looks like.\u201d<\/p>\n<\/div>\n

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Votes \u2018Did Not Pass Muster\u2019<\/h2>\n<\/div>\n

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In Monday\u2019s order, Lopez noted numerous distinctions between the Chapter 11 case before him and Johnson & Johnson\u2019s prior talc bankruptcies. In the first talc bankruptcy, filed in 2021, U.S. Bankruptcy Judge Michael Kaplan of the District of New Jersey refused to dismiss the case, but the Third Circuit reversed, finding that LTL was not in financial distress. With a revised funding agreement, LTL filed a second bankruptcy in 2023, which Kaplan dismissed, citing the Third Circuit\u2019s decision.<\/p>\n<\/div>\n

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At a hearing, Lopez heard two weeks of witness testimony<\/u><\/a> <\/a>and arguments<\/u> <\/a>on whether to dismiss the Chapter 11 case, which Red River Talc filed on Sept. 16 <\/u><\/a>of last year. Much of the hearing, however, focused on an element that didn\u2019t exist in the prior talc bankruptcies: a pre-packaged vote on the plan. Johnson & Johnson insisted that 75% or more of talc claimants voted in favor of the plan, but a small coalition of firms opposing the bankruptcy raised accusations of ballot stuffing<\/u><\/a> <\/a>to achieve the support of 82% of an estimated 93,000 talc claimants.<\/p>\n<\/div>\n

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During the hearing<\/u><\/a>, Lopez asked lawyers who testified how they voted for their clients.<\/p>\n<\/div>\n

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The attorneys had the option to vote on behalf of clients who had instructed them whether they supported the plan or opposed it, or to cast a ballot under their power of attorney for clients who didn\u2019t indicate their preference.<\/p>\n<\/div>\n

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Lopez said there were numerous issues with the votes cast under the latter option, which \u201cdoes not pass muster.\u201d<\/p>\n<\/div>\n

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Mikal Watts,.<\/figcaption><\/figure>\n<\/p>\n<\/div>\n

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He specifically referenced more than 25,000 votes cast by Mikal Watts, of Watts Law Firm in Austin, Texas; Adam Pulaski, of Pulaski Kherkher in Houston; and Anne Andrews, of Andrews & Thornton in Newport Beach, California.<\/p>\n<\/div>\n

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\u201cThe general power under the engagement letters that Andrews, Watts, and Pulaski relied on do not give them express authority to vote on behalf of their clients in this bankruptcy,\u201d he wrote. The engagement letters of all three also said they couldn\u2019t negotiate a settlement, as the bankruptcy plan was characterized, without the client\u2019s consent.<\/p>\n<\/div>\n

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\u201cThe court expressly finds that Andrews, Watts, and Pulaski submitted their master ballots in good faith, believing that they had the authority to vote on behalf of their clients,\u201d he wrote. \u201cThat said, believing one is right does not make it so.\u201d<\/p>\n<\/div>\n

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Lopez also found the attorneys didn\u2019t give their clients, who are women suffering from ovarian and other gynecological cancers, enough time to make a decision. <\/p>\n<\/div>\n

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\u201cThousands of claimants were given an unreasonably short time to vote even though there was no real deadline or contingency to start this case,\u201d he wrote. \u201cThere was also a controversial vote switch that did not follow the tabulation procedures in the master ballots and the disclosure statement.\u201d<\/p>\n<\/div>\n

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That controversial switch involved Andy Birchfield, of Montgomery, Alabama\u2019s Beasley Allen, who alleged that his co-counsel, R. Allen Smith, of the Smith Law Firm in Ridgeland, Mississippi, had changed the votes of their 11,000 clients from \u201cno\u201d to \u201cyes\u201d after negotiating another $1.1 billion in the plan. Lopez said there were problems with both firms, which voted on behalf of clients without their consent.<\/p>\n<\/div>\n

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However, Lopez also concluded there was no bad faith among the attorneys or Johnson & Johnson, calling many of its actions \u201cinadvertent mistakes.\u201d<\/p>\n<\/div>\n

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\u201cAny mistakes were not intentional. There was no evidence of collusion or other improper behavior,\u201d he wrote. \u201cBut the substantive prepetition solicitation and voting issues are troubling.\u201d<\/p>\n<\/div>\n

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A judge dismissed Johnson & Johnson\u2019s third talc bankruptcy after finding \u201csignificant voting and solicitation irregularities\u201d in about half of the votes supporting the proposed $10 billion Chapter […]<\/p>\n","protected":false},"author":1,"featured_media":5034,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[128,1208,2059,5322,627,423,346,625,1535,4409],"class_list":["post-5033","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lawyers","tag-bankruptcy","tag-citing","tag-dismissed","tag-irregularities","tag-jjs","tag-judge","tag-significant","tag-talc","tag-texas","tag-voting"],"_links":{"self":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/5033","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/comments?post=5033"}],"version-history":[{"count":0,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/5033\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media\/5034"}],"wp:attachment":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media?parent=5033"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/categories?post=5033"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/tags?post=5033"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}