CHARLOTTE – On a litigation field where corporations keep hitting home runs against asbestos plaintiff firms, Johnson & Johnson hit a foul ball.
The company’s effort to separate litigation liabilities from operating assets through bankruptcy proceedings in North Carolina, landed in New Jersey.
Bankruptcy Judge Craig Whitley suggested transfer at a hearing on Oct. 20, and court administrator Shelley Abel moved for it on Oct. 25.
Nothing requires deference to a debtor’s choice of venue, “when it is entirely manufactured,” Abel wrote.
Johnson & Johnson is a New Jersey business and that a multi district judge in New Jersey presides over approximately 35,000 claims, she wrote.
Whitley said at his hearing that, “There’s a limit to what I can do.” He said he has five asbestos cases and fellow bankruptcy judge Laura Beyer has two.
Four straight days of action at the court last week reflected the intensity of those cases.
Beyer held a hearing for Georgia Pacific entity Bestwall on Oct. 19, and Whitley held one for Certainteed entity DBMP on Oct. 21 and 22.
Georgia Pacific set the pattern others have followed, by assigning assets to a New GP entity and litigation liabilities to Bestwall.
Bestwall filed a bankruptcy petition in 2017, and received authority from Beyer to investigate a theory that fraud inflated its settlements.
According to Bestwall, some plaintiffs alleged one set of exposures in civil courts and another set in private bankruptcy trusts.
Bestwall has begun receiving questionnaires that could detect double dipping.
Bestwall’s progress has brought imitation, but nothing like Johnson & Johnson.
Its subsidiary Johnson & Johnson Consumer Inc. split, assigning assets to a New JJCI entity and litigation liabilities to LTL Management.
On Oct. 14, LTL counsel John Miller of Charlotte filed the bankruptcy petition, stating that the case would permanently resolve cosmetic talc claims in an efficient and equitable manner.
Miller wrote in the petition that Johnson & Johnson prevailed in a majority of talc trials, yet was subject to extraordinary judgments. This year, jurors awarded $25 million in compensatory damages and $100,000 in punitive damages to a plaintiff.
Also this year, he wrote, jurors awarded $2.5 million in compensatory damages and $25 million in punitive damages to a plaintiff.
“If only a small fraction of the pending cases continued to yield such inconsistent and excessive awards, the assets available to pay current and future claimants could have been exhausted,” Miller wrote.
Johnson & Johnson and New JCCI would advance $2 billion into a settlement fund, according to the petition.
“Although the debtor and J & J strongly believe $2 billion is substantially in excess of any liability the debtor should have, J & J and New JCCI have made this commitment to eliminate any doubt regarding the debtor’s financial ability to pay legitimate claims,” Miller wrote.
He wrote that if allegations were correct that baby powder caused disease, “there should have been long ago an epidemic clearly attributed to the use of the product.”
The company’s baby powder went on the market in 1894, and hundreds of millions of consumers worldwide have used it. But few lawsuits were filed until most asbestos defendants exited the tort system and counsel looking for a solvent defendant revived old allegations, according to the petition.
Last year, Johnson & Johnson Consumer discontinued its baby powder line in the U.S. and Canada. That decision was based on considerations including misinformation disseminated by the plaintiff bar, Miller wrote.
From 2016 through 2020, Johnson & Johnson was added as an additional defendant in 62 percent of mesothelioma cases.
Notably, 71 percent of these mixed exposure cases were filed in Madison County, “historically a plaintiff favored jurisdiction for asbestos litigation where most cases end in settlement,” Miller wrote.
LTL moved for a stay and an emergency hearing, which Whitley held six days later.
LTL counsel Greg Gordon of Dallas told him LTL would be as able to make equitable payments as Johnson & Johnson Consumer, or more able.
Gordon said there was a tidal wave of ovarian cancer claims after asbestos defendants continued going into bankruptcy.
He said 46 cases were filed in 2014, 5,000 in 2017, and 12,300 this year.
He also said the claims have no valid scientific basis, and that Johnson & Johnson succeeded in six jury trials this year. The two verdicts for plaintiffs showed nearly opposite proportions of compensatory damages to punitive damages.
He described the current situation as “huge recoveries for a small group and nothing for the rest.”
“It is unfair and inequitable not just to companies but to plaintiffs as well,” he said.
He said he anticipated at least six decades of lawsuits.
“Meaningful negotiations could begin almost immediately,” he said.
“This case is not about securing a discount. It’s about securing an agreement.”
Attorney Melanie Cyganowski, representing the claimant committee in the New Jersey action, said it was a sad day and outrageous.
Cyganowski said bankruptcy court is for honest debtors.
She said multi district litigation was a perfect way to resolve liabilities.
As the hearing ended, Whitley expressed doubt about his jurisdiction.
He found minimal contacts between LTL and North Carolina’s Western District.
He said Johnson & Johnson and the multi district judge were in New Jersey.
“I question why we’re the arbiters for all courts in all districts,” Whitley said.
The transfer motion of court administrator Abel distinguished the case from Bestwall, who found its choice of venue no worse than any other.
Abel wrote that 35,000 claims are pending in New Jersey, insurance litigation is pending there, Johnson & Johnson’s principal place of business is there, and likely witnesses are there.
“The manufacturing of venue for this bankruptcy case is only a minor portion of the legal maneuvering undertaken by the debtor in its effort to change the narrative surrounding talc related claims against Old JCCI,” she wrote.
“Nothing in this motion is intended to limit the inquiry into the propriety of that maneuvering.
“Rather, it should be viewed as simply the first step in the analysis.”
She reserved her rights for the benefit of all parties in interest regarding additional challenges to the organization of the debtor and its affiliates.