In early 2022, the United States Bankruptcy Court for the District of New Jersey will conduct hearings that could have ramifications for mass tort litigation and what is considered to be a valid purpose of a bankruptcy case. On one side of the dance floor, a Chapter 11 debtor LTL Management LLC (“Debtor”), a subsidiary of Johnson & Johnson Consumer Inc. (“Old JJCI”), which is itself a subsidiary of Johnson & Johnson (“J&J”). These entities are facing 38,000 lawsuits from individuals alleging that J&J talcum powder products were tainted with asbestos and caused cancer. Old JJCI used a Texas divisive merger statute to form the Debtor two days before the bankruptcy case and transferred its talc liabilities to the Debtor, a restructuring strategy dubbed the “Texas Two Step.” On the other side of the dance floor, the Official Committee of Talc Claimants (“Talc Committee”)—a committee of law firms prosecuting these talc liability lawsuits on behalf of thousands of individuals. Neither side held back any “dry powder.” At the outset of the case, before any motions were filed, the Debtor filed a 128-page “informational brief” to provide an overview of the Debtor’s goals. The Talc Committee responded with its own document, a 22-page “initial statement.”

The bankruptcy case was initially filed in North Carolina in October 2021 but was transferred to New Jersey before U.S. Bankruptcy Judge Kaplan. The Talc Committee subsequently filed a motion to dismiss the case, and that motion will be heard by Judge Kaplan on Feb. 15, 2022. Arnold & Itkin LLP, a law firm that represents over 7,000 talc personal injury claimants, filed a similar motion. The motions allege that the Debtor’s use of the Texas Two Step to isolate talc liabilities is evidence of a bad faith bankruptcy filing and the case should be dismissed.  

Creation of the Debtor Prior to Bankruptcy

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