LTL Mgmt. v. Those Parties Listed on Appendix A to the Complain
| Decision Date | 27 April 2023 |
| Docket Number | 23-12825 MBK,Adv. Pro. 23-01092 (MBK) |
| Parties | LTL Management, LLC, Debtor. v. Those Parties Listed on Appendix A to the Complaint and John and Jane Does 1-1000, Defendants. LTL Management, LLC, Plaintiff, |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NOT FOR PUBLICATION
Hearing Date: April 18, 2023.
All Counsel of Record
Michael B. Kaplan, Chief Judge U.S. Bankruptcy Court District of New Jersey.
This matter comes before the Court by way Debtor's bankruptcy case (Case No. 23-12825) and subsequent adversary proceeding (Adv. Pro. No. 23-01092) and motion ("Motion") (ECF No. 2 in Adv. Pro. No. 23-01092)[1] filed by Plaintiff LTL Management, LLC ("LTL" or "Debtor") seeking an Order (I) Declaring That the Automatic Stay Applies or Extends to Certain Actions Against Non-Debtors (II) Preliminarily Enjoining Such Actions, and (III) Granting a Temporary Restraining Order Ex Parte Pending a Hearing on a Preliminary Injunction Filed by LTL Management LLC. The Court has fully considered the submissions of the parties and the arguments set forth on the record at a hearing held on April 18, 2023. The Court also takes judicial notice of prior rulings and documents filed in this and in the prior bankruptcy case (Case No. 21-30589) and the related adversary proceedings.[2] For the reasons set forth below, the Court grants Debtor's Motion in part and denies the Motion in part and enters a limited preliminary injunction (the "Preliminary Injunction").[3] Specifically-with the exception of the Multi-District Litigation ("MDL")-the limited Preliminary Injunction will prohibit only the commencement or continuation of any trial and appellate practice against any of the parties identified in Appendix B to the Verified Complaint, as amended[4] (the "Protected Parties"), through and including June 15, 2023, a period of approximately 60 days. No parties are enjoined or restrained from filing new complaints against non-debtor third parties, or from engaging in any ongoing discovery or other pre-trial matters. On the May 22, 2023 omnibus date, the Court will revisit the continuation and/or modification of the Preliminary Injunction as it relates the MDL pending before Judge Shipp. The Court issues the following findings of fact and conclusions of law as required by Fed.R.Bankr.P. 7052.[5]
I. Venue and Jurisdiction
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. As explained in detail below, this matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A) and (G). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
II. Background
The parties are familiar with the factual background and procedural history of this case. LTL, which is an indirect subsidiary of Johnson & Johnson ("J&J"), traces its roots back to Johnson & Johnson Baby Products, Company, 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 ("Kim Decl.") ¶¶ 13-15, ECF No. 4 in Case No. 23-12825. A thorough discussion of the history of J&J and its talc products can be found in this Court's February 25, 2022 Opinion Denying the Motions to Dismiss and the Court will limit its recitation of the factual background here. See In re LTL Mgmt., LLC, 637 B.R. 396 (Bankr. D.N.J. 2022). In relevant part, in 1979, J&J transferred all its assets associated with the Baby Products division to J&J Baby Products Company (the "1979 Agreement"). Thereafter, as the result of intercompany transactions, one of J&J's corporate subsidiaries, Johnson & Johnson Consumer Inc. ("Old JJCI") assumed responsibility for all claims alleging that J&J's talc-containing products caused ovarian cancer and mesothelioma. Kim Decl. ¶¶ 16-21, ECF No. 4 in Case No. 23-12825.
On October 12, 2021, Old JJCI engaged in a series of transactions pursuant to the Texas divisional merger statute, See Tex. Bus. Orgs. Code Ann. §§ 10.001 et seq. (the "2021 Corporate Restructuring") through which it ceased to exist and two new companies, LTL and Johnson & Johnson Consumer Inc. ("New JJCI"), were formed. Kim Decl. ¶ 24, ECF No. 4 in Case No. 23-12825. 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." Kim Decl. ¶ 29, ECF No. 4 in Case No. 21-30589. As a result of the restructuring, LTL assumed responsibility for all of Old JJCI's talc-related liabilities. Id. Through the restructuring, LTL also received rights under a funding agreement (the "2021 Funding Agreement"). Kim Decl. ¶ 32, ECF No. 4 in Case No. 23-12825. Under the 2021 Funding Agreement, J&J and New JJCI were obligated to pay, inter alia, the "Payee's Talc-Related Liabilities", as well as "any and all costs and expenses" LTL incurs during its bankruptcy case, "including the costs of administering the Bankruptcy Case" to the extent necessary. Funding Agreement 6, Annex 2 to Kim Decl. in Support of First Day Pleadings, ECF No. 5 in Case No. 21-30589; see also Kim Decl. ¶ 32, ECF No. 4 in Case No. 23-12825.
On October 14, 2021, LTL filed its initial voluntary petition for chapter 11 relief in the United States Bankruptcy Court for the Western District of North Carolina. Petition, ECF No. 1 in Case No. 21-30589. One week after the chapter 11 filing, Debtor initiated an adversary proceeding (the "Talc Adversary Proceeding"), seeking declaratory and injunctive relief against plaintiffs (the "Talc Claimants") who had filed federal and state actions against Debtor's affiliates and other entities for talc-related claims (the "Talc Actions"). Complaint, ECF No. 1 in Adv. Pro. No. 21-03032. By way of the Talc Adversary Proceeding, the Debtor sought an order declaring that the automatic stay applies to those actions against nondebtors or, in the alternative, to enjoin such actions and grant a temporary restraining order pending a final hearing. Debtor simultaneously filed a motion requesting a preliminary injunction enjoining the prosecution of actions outside of the chapter 11 case on account of the same talc claims that exist against the Debtor in the chapter 11 case. Motion, ECF No. 2 in Adv. Pro. No. 21-03032. Ultimately, the chapter 11 and related adversary proceeding case were transferred to the District of New Jersey. Following a five-day evidentiary hearing-during which the Court contemporaneously heard arguments on pending motions to dismiss-the Court denied the motions to dismiss in the underlying bankruptcy case and granted the motion for preliminary injunction in the Talc Adversary Proceeding. See In re LTL Mgmt., LLC, 637 B.R. 396 (Bankr. D.N.J. 2022) (); In re LTL Management, LLC, 638 B.R. 291, 297 (Bankr. D.N.J. 2022) (granting preliminary injunction). Several other adversary proceedings followed wherein Debtor sought similar relief. See Securities Adversary Proceeding, Adv. Pro. No. 22-01073; Consumer Protection Adversary Proceeding, Adv. Pro. No. 22-01231. This Court likewise granted the motion for preliminary injunction and extended the automatic stay to nondebtor defendants in those actions. See In re LTL Mgmt., LLC, No. 22-01073, 640 B.R. 322 (Bankr. D.N.J. 2022); In re LTL Mgmt., LLC, 645 B.R. 59 (Bankr. D.N.J. 2022).
Meanwhile, several parties appealed this Court's denial of the motions to dismiss and its imposition of a preliminary injunction in the Talc Adversary Proceeding. While the appeals were pending, New JJCI-which had continued operations-changed its name to Johnson & Johnson Holdco (NA) Inc. ("Holdco") in December 2022. Kim Decl. ¶ 26, ECF No. 4 in Case No. 23-12825. Holdco is the direct parent of the Debtor. Id. at ¶ 27. In early January 2023, Holdco transferred its Consumer Business assets to its parent entity. Id. at ¶ 26.
On January 30, 2023, the Third Circuit ruled on the pending appeals and issued an opinion directing this Court to dismiss the 2021 Chapter 11 Case (the "Third Circuit Opinion"). See In re LTL Mgmt., LLC, 58 F.4th 738 (3d Cir. 2023) 2023 WL 2726441 (3d Cir. Mar. 31, 2023). Specifically, the Third Circuit ruled that the case was not filed in good faith due to Debtor's lack of financial distress. The Debtor filed a petition for rehearing and rehearing en banc with the Third Circuit, which the circuit court denied on March 22, 2023. The Debtor then filed a motion seeking a stay of the Third Circuit's mandate pending appeal to the United States Supreme Court which the circuit court denied on March 31, 2023. This Court entered an order dismissing the initial chapter 11 bankruptcy case on April 4, 2023. Dismissal Order, ECF No. 3938 in Case No. 21-30589. Approximately two hours later, Debtor initiated the instant bankruptcy case. Petition, ECF No. 1 in Case No. 23-12825. In conjunction with the Petition, Debtor filed "support agreements (collectively, the "Plan Support Agreements") that have been executed and delivered by counsel on behalf of over 60,000 claimants and signed by the Debtor, Holdco and J&J[,]" which Debtor states demonstrates support for "an agreement with thousands of claimants on a broad outline of terms for a plan of reorganization, including financial terms, that, if confirmed and consummated, would fully resolve all the Debtor's liability for talc-related claims." Kim Decl. ¶ 72, ECF No. 4 in Case No. 23-12825. Debtor also terminated the 2021 Funding Agreement and entered into "new financing arrangements." Id. at ¶ 78. The new funding agreement (the "2023...
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