In re LTL Mgmt., LLC.
| Decision Date | 20 January 2022 |
| Docket Number | Case No. 21-30589 (MBK) |
| Parties | IN RE: LTL MANAGEMENT, LLC., Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Brad Jeffrey Axelrod, James N. Lawlor, Paul R. DeFilippo, Paul R. DeFilippo, Lyndon Mitchell Tretter, Wollmuth Maher & Deutsch LLP, Kristen R. Fournier, King & Spalding LLP, James M. Jones, Jones Day, Glenn M. Kurtz, Jessica Lauria, White & Case LLP, New York, NY, Caitlin K. Cahow, Jones Day, Brad B. Erens, Chicago, IL, Kathleen A. Frazier, Shook, Hardy & Bacon L.L.P, Houston, TX, Gregory M. Gordon, Daniel B. Prieto, Mark W. Rasmussen, Amanda Rush, Jones Day, Dallas, TX, Robert W. Hamilton, Jones Day, Columbus, OH, John R. Miller, Jr., C. Richard Rayburn, Jr., Matthew L. Tomsic, Rayburn Cooper Durham P.A., Charlotte, NC, for Debtor.
Arthur Abramowitz, Sherman Silverstein, Sherman, Silverstein, Kohl, Rose & Podolsky, P.A., Moorestown, NJ, Bailey Glasser, Washington, DC, Brown Rudnick Berlack Israels LLP, Seven Times Square, David J. Molton, Brown Rudnick LLP, Otterbourg P.C., Cooley, LLP, New York, NY, Donald W. Clarke, Daniel Stolz, Genova Burns LLC, Basking Ridge, NJ, for Creditor Committee Committee of Talc Claimants.
Lauren Bielskie, Mitchell Hausman, United States Department of Justice, Jeffrey M. Sponder, Office of U.S. Trustee, Newark, NJ, for U.S. Trustee.
Donald W. Clarke, Daniel Stolz, Genova Burns LLC, Basking Ridge, NJ, for Creditor Committee Official Committee of Talc Claimants I/Special Counsels Massey & Gail LLP, Parkins Lee & Rubio LLP.
James N. Lawlor, Wollmuth Maher & Deutsch LLP, New York, NY, for Special Counsel Patterson Belknap Webb & Tyler LLP.
Paul R. DeFilippo, Wollmuth Maher & Deutsch LLP, New York, NY, for Special Counsel Weil, Gotshal, & Manges, LLP.
Brett Kahn, Thomas Ladd, McCarter & English, Newark, NJ, for Special Counsel McCarter & English, LLP.
Cary Joshi, Bailey & Glasser LLP, Washington, DC, Evan Lazerowitz, Cooley LLP, New York, NY, Alan I. Moldoff, Ross J. Switkes, Sherman, Silverstein, Kohl, Rose & Podolsky, P.A., Moorestown, NJ, Daniel Stolz, Genova Burns LLC, Basking Ridge, NJ, for Creditor Committee Official Committee of Talc Claimants II.
ALL COUNSEL OF RECORD
This matter comes before the Court upon motions (collectively, "Motions") filed by the Debtor, LTL Management, LLC ("LTL" or "Debtor") (ECF No. 1047) and the law firm of Arnold & Itkin, LLP, on behalf of certain talc personal injury claimants (ECF No. 1067) (together "Movants"), seeking an Order determining that the Notice of the United States Trustee's Filing of Reconstituted and Amended: (i) Notice of Appointment of Official Committee of Talc Claimants I; and (ii) Notice of Appointment of Official Committee of Talc Claimants II (ECF No. 965) (the "Notice of Appointment") is invalid and reinstating the Talc Claimants Committee appointed by order of the United States Bankruptcy Court for the Western District of North Carolina (ECF No. 355). The Court has considered fully the parties’ submissions as well as the arguments raised during the hearing on January 19, 2022. For the reasons expressed below, the Court grants the Motions in part and strikes the Notice of Appointment. The Court issues the following findings of fact and conclusions of law as required by FED. R. BANKR. P. 7052.1
The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all Bankruptcy cases to the Bankruptcy Court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A). Venue is proper in this Court pursuant to 28 U.S.C. § 1408.
On October 14, 2021, LTL filed a voluntary petition for chapter 11 relief in the United States Bankruptcy Court for the Western District of North Carolina (the "North Carolina bankruptcy court"). (ECF No. 1). LTL is an indirect subsidiary of Johnson & Johnson ("J&J") and traces its roots back to Johnson & Johnson Baby Products, Company ("J&J Baby Products"), a New Jersey company incorporated in 1970 as a wholly owned subsidiary of J&J. Declaration of John K. Kim in Support of First Day Pleadings ¶ 9-10. ECF No. 5. J&J, a New Jersey company incorporated in 1887, first began selling JOHNSON'S® Baby Powder in 1894, launching its baby care line of products. Id . at ¶¶ 10-14. In 1972, J&J established a formal operating division for its baby products business, which included JOHNSON'S® Baby Powder. Id. In 1979, J&J transferred all its assets associated with the Baby Products division to J&J Baby Products. Id. In connection with this transfer, J&J Baby Products assumed all liabilities associated with the Baby Products division. Id. Prior or to October 12, 2021, one of J&J's corporate subsidiaries was Johnson & Johnson Consumer Inc. ("Old JJCI"). Id . As the result of a series of intercompany transactions, Old JJCI assumed responsibility for all claims alleging that J&J's talc-containing baby powder caused ovarian cancer and mesothelioma. Id . at ¶¶ 15, 32.
On October 12, 2021, Old JJCI engaged in a series of transactions through which it ceased to exist and two new companies, LTL and Johnson & Johnson Consumer Inc. ("New JJCI"), were formed. Id . at ¶¶ 16, 22-23. The alleged purpose of this restructuring was to "globally resolve talc-related claims through a chapter 11 reorganization without subjecting the entire Old JJCI enterprise to a bankruptcy proceeding." Id . at ¶ 21. As a result of the restructuring, LTL assumed responsibility for all of Old JJCI's talc-related liabilities. Id . at ¶¶ 16, 24. Through the restructuring, LTL also received Old JJCI's rights under a funding agreement (the "Funding Agreement"). Id . at ¶ 24. Under the Funding Agreement, J&J and New JJCI are obligated to pay "any and all costs and expenses" LTL incurs during its bankruptcy case, "including the costs of administering the Bankruptcy Case" to the extent necessary. Annex 2 to Declaration of John K. Kim in Support of First Day Pleadings: Funding Agreement 6, ECF No. 5.
The day after LTL's bankruptcy petition was filed, the United States Bankruptcy Administrator for the Western District of North Carolina (the "Bankruptcy Administrator") filed a notice soliciting parties interested in serving on an Official Committee of Talc Claimants. Notice of Solicitation of Parties Interested in Serving on the Official Committee of Talc Claimants, ECF No. 38. In that notice, the Bankruptcy Administrator explained that she was "tasked with recommending the appointment of an official committee of creditors or claimants." Id . at 10. On October 28, 2021, the Bankruptcy Administrator filed a motion (ECF No. 227) requesting that the North Carolina bankruptcy court appoint an Official Committee of Talc Claimants and recommending persons that the court should appoint to the committee. The Western District of North Carolina is not part of the United States Trustee system that we enjoy here in the District of New Jersey. See 28 U.S.C. § 581. Among the many differences under this system of oversight is that all decisions under 11 U.S.C. § 1102 regarding the number and membership of committees in the Western District of North Carolina are made with the express approval of the bankruptcy court. Several responses and objections to the proposed committee's composition were filed. See, e.g. , ECF Nos. 240, 256, 258, 278, 279, 280, 291, 307, 309, 316.
By way of an order entered on November 8, 2021 (the "TCC Order"), the North Carolina bankruptcy court, "acting pursuant to its authority under 11 U.S.C. § 1102," established the Official Committee of Talc Claimants in this case (the "Original TCC"), composed of the eleven members proposed by the Bankruptcy Administrator. Order Appointing the Official Committee of Talc Claimants , ECF No. 355. The TCC Order stated that the Bankruptcy Administrator's motion was being granted "without prejudice to further consideration of" the various responses and objections that had already been filed regarding the composition of the TCC, either by the North Carolina bankruptcy court "or any court with jurisdiction." Id . at 5. On November 16, 2021, the North Carolina bankruptcy court entered an order transferring venue of this case to the District of New Jersey. Order Transferring Case to the District of New Jersey , ECF No. 416.
On December 23, 2021, the United States Trustee for Region 3 (the "U.S. Trustee"), pursuant to his obligations under 11 U.S.C. § 1102(a), filed the Notice of Appointment. The Notice of Appointment stated that the U.S. Trustee had determined to reconstitute the Original TCC and appoint the Official Committee of Talc Claimants I (the "Ovarian Cancer Claimants Committee" or "TCC I")2 and the Official Committee of Talc Claimants II (the "Mesothelioma Claimants Committee" or "TCC II", and together with the Ovarian Cancer Claimants Committee, the "Committees"). The Notice of Appointment also stated that the U.S. Trustee had taken action to expand membership of the Original TCC and, accordingly, "no member of the [TCC] as originally constituted has been removed from committee membership." Notice of Appointment 2, ECF No. 965. TCC I is comprised of nine (9) members, seven (7) of whom were members of the Original TCC—including the insurance claimant—plus two (2) new members. TCC II consists of seven (7) members, four (4) of whom were members of the Original TCC plus three (3) new members.
On January 3, 2022, the Debtor filed a motion (ECF No. 1047) before this Court seeking an Order determining that the Notice of Appointment is invalid and reinstating the TCC appointed by order of the United States Bankruptcy Court for the Western District of North Carolina. Similarly, on January 5, 2022, the law firm of Arnold & Itkin, LLP, on behalf of approximately 7,000 talc personal injury claimants, filed a motion (ECF No....
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