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The Texas Two-Step: Johnson&Johnson Declares Bankruptcy


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Just a reminder that J&J itself did not directly seek bankruptcy protection.

Johnson & Johnson Consumer Inc. (“Old JJCI”) merged into a newly formed Texas limited liability company, and the surviving entity (a Texas entity) then engaged in a divisive merger under Texas law. As a result of the divisive merger, (a) Old JJCI ceased to exist, (b) two new Texas limited liability companies were created; © Old JJCI allocated its talc-related liabilities and certain assets to one of the new LLCs (the “Debtor LLC”) and the non-talc liabilities and remaining assets to the other LLC (the “Non-Debtor LLC”). The Debtor LLC then converted to a North Carolina limited liability company and changed its name to LTL Management LLC. All of these actions occurred between 9:00 a.m. and 1:00 p.m. on October 12. Two days later, the Debtor LLC filed for Chapter 11 protection in North Carolina. In the meantime, the Non-Debtor LLC merged into a newly created New Jersey corporation and changed its name to Johnson & Johnson Consumer Inc. (“New JJCI”). J&J Consumer, Inc, its subsidiary, was split into two businesses.

What is key here is that J&J has it’s own separate and distinct liability for its decades of conduct, and by using the bankruptcy abomination in Texas J&J can have it’s toadie subsidiary file - and have big rich evil J&J take advantage of stay rules to duck its liability. Even though the fraudulently created LTL Management Inc is the only filed company, Big J&J gets out of jail as well.

I don’t care if LTL files and the plan is approved, so long as J&J remains to face it’s independent bad conduct. Thank God the 4th accepted the appeal. We need to put a fork in the plan before it progresses to a point it is politically or efficiency/resource deemed to be a better way to end the whole mess.

The Talc PSC All Counsel call is tomorrow, so maybe some light might be shed.

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On 5/24/2022 at 7:37 PM, Gatorubet said:

Just a reminder that J&J itself did not directly seek bankruptcy protection.

Johnson & Johnson Consumer Inc. (“Old JJCI”) merged into a newly formed Texas limited liability company, and the surviving entity (a Texas entity) then engaged in a divisive merger under Texas law. As a result of the divisive merger, (a) Old JJCI ceased to exist, (b) two new Texas limited liability companies were created; © Old JJCI allocated its talc-related liabilities and certain assets to one of the new LLCs (the “Debtor LLC”) and the non-talc liabilities and remaining assets to the other LLC (the “Non-Debtor LLC”). The Debtor LLC then converted to a North Carolina limited liability company and changed its name to LTL Management LLC. All of these actions occurred between 9:00 a.m. and 1:00 p.m. on October 12. Two days later, the Debtor LLC filed for Chapter 11 protection in North Carolina. In the meantime, the Non-Debtor LLC merged into a newly created New Jersey corporation and changed its name to Johnson & Johnson Consumer Inc. (“New JJCI”). J&J Consumer, Inc, its subsidiary, was split into two businesses.

What is key here is that J&J has it’s own separate and distinct liability for its decades of conduct, and by using the bankruptcy abomination in Texas J&J can have it’s toadie subsidiary file - and have big rich evil J&J take advantage of stay rules to duck its liability. Even though the fraudulently created LTL Management Inc is the only filed company, Big J&J gets out of jail as well.

I don’t care if LTL files and the plan is approved, so long as J&J remains to face it’s independent bad conduct. Thank God the 4th accepted the appeal. We need to put a fork in the plan before it progresses to a point it is politically or efficiency/resource deemed to be a better way to end the whole mess.

The Talc PSC All Counsel call is tomorrow, so maybe some light might be shed.

Thanks to Chadfuck for the typo alert.  3rd Circuit, not 4th.   I chatted with the PSC Bankruptcy lead counsel in Vegas at the MTMP shin-dig.   She was not sure the appellate court would take it as a final judgement.   Glad it is expedited.   Briefing should be done around August.   Pretty damn quick.  I think 10-11 months is the average 3rd Circuit turn around if they hear it, so this is great news. 

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  • 8 months later...

Surprised no one else posted this already.  Or if they did, I didn't see it.

https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismissed-by-us-appeals-court-filing-2023-01-30/

Quote

U.S. court rejects J&J bankruptcy strategy for tens of thousands of talc lawsuits

Opinion:  https://www2.ca3.uscourts.gov/opinarch/222003p.pdf

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1 hour ago, Chad Fuck said:

No one said anything about dick sucking.

As we say in East Texas, "first dog hollers."

Read that this morning.   Chef’s kiss is below in bold.   The 3rd Circuit used the assholes own counsels’ averments to the lower courts as the basis for dismissing the bankruptcy.   Justice boner engaged….for now.    This is a sexy case with an arguable 3rd/4th Circuit split.   En banc reversal seems like a reach - but SCOTUS is always there to prop up corporations over people to resolve the ambiguity. 

 

Quote

From these facts—presented by J&J and LTL themselves—we can infer only that LTL, at the time of its filing, was highly solvent with access to cash to meet comfortably its liabilities as they came due for the foreseeable future. It looks correct to have implied, in a prior court filing, that there was not “any imminent or even likely need of [it] to invoke the Funding Agreement to its maximum amount or anything close to it.” App. 3747 (LTL’s Obj. to Mots. for Cert. of Direct Appeal 22) (emphasis added). Indeed, the Funding Agreement itself recited that LTL, after the divisional merger and assumption of that Agreement, held “assets having a value at least equal to its liabilities and had financial capacity sufficient to satisfy its obligations as they become due in the ordinary course of business, including any [t]alc [r]elated [l]iabilities.” App. 4313 (Funding Agreement 1, ¶ E) (emphasis added).
We take J&J and LTL at their word and agree. 

 

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Overall this is a good opinion. It does leave an interesting question, as it appears to leave open the ability of j&j to simply do another divesting merger, and this time not promise the new entity such a generous payment provision. That would probably run into some other bankruptcy rules, but even so, just doing the move would again buy 3m more time and give it another shot at getting in a preferred venue. 

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5 minutes ago, Gatorubet said:

Read that this morning.   Chef’s kiss is below in bold.   The 3rd Circuit used the assholes own counsels’ averments to the lower courts as the basis for dismissing the bankruptcy.   Justice boner engaged….for now.    This is a sexy case with an arguable 3rd/4th Circuit split.   En banc reversal seems like a reach - but SCOTUS is always there to prop up corporations over people to resolve the ambiguity. 

 

 

 

That's beautiful... J&J meeting with their lawyers now...

Jimmy Fallon Reaction GIF by The Tonight Show Starring Jimmy Fallon

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35 minutes ago, Dahobbs said:

Overall this is a good opinion. It does leave an interesting question, as it appears to leave open the ability of j&j to simply do another divesting merger, and this time not promise the new entity such a generous payment provision. That would probably run into some other bankruptcy rules, but even so, just doing the move would again buy 3m more time and give it another shot at getting in a preferred venue. 

There is actually another important issue at play. J&J has long-standing and arguably relatively demonstrable liability for its direct action (or inaction) arising from its decades-long control over the marketing and use of contaminated talc product.

I’m pretty sure the tort claimants committee had this included in our brief, but it really wasn’t addressed in this opinion.  But remember, if a future subsidiary of J&J is allowed to go bankrupt (like LTL tried) - that should not negate plaintiff’s ability to pursue J&J’s liability for its independent negligent and intentional acts.   The purpose of a shell corporation/two step bankruptcy is to protect J&J.     If tort claimants can still sue J&J after the shell corporation is granted bankruptcy protection, it moots the very reason for the shell corporation’s bankruptcy. The breadth of the stay - and J&J’s potential inclusion in the stay despite its independent liability - is everything. 

That argument was not necessary to resolve the appeal, so it was not addressed by the Third Circuit.  I still think it has merit.

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Overall this is a good opinion. It does leave an interesting question, as it appears to leave open the ability of j&j to simply do another divesting merger, and this time not promise the new entity such a generous payment provision. That would probably run into some other bankruptcy rules, but even so, just doing the move would again buy 3m more time and give it another shot at getting in a preferred venue. 

They covered it in Fn 18. It says in essence, “don’t think you can get cute with us.”
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3 minutes ago, Gatorubet said:

There is actually another important issue at play. J&J has long-standing and arguably relatively demonstrable liability for its direct action (or inaction) arising from its decades-long control over the marketing and use of contaminated talc product.

I’m pretty sure the tort claimants committee had this included in our brief, but it really wasn’t addressed in this opinion.  But remember, if a future subsidiary of J&J is allowed to go bankrupt (like LTL tried) - that should not negate plaintiff’s ability to pursue J&J’s liability for its independent negligent and intentional acts.   The purpose of a shell corporation/two step bankruptcy is to protect J&J.     If tort claimants can still sue J&J after the shell corporation is granted bankruptcy protection, it moots the very reason for the shell corporation’s bankruptcy. The breadth of the stay - and J&J’s potential inclusion in the stay despite its independent liability - is everything. 

That argument was not necessary to resolve the appeal, so it was not addressed by the Third Circuit.  I still think it has merit.

I agree with you and you'll see a similar strategy was rejected in 3M earplug litigation. However, here at least, the original bankruptcy court ok'd the stay applying to j&j. If I'm j&j, I do another merger and take stab at it. 

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There is actually another important issue at play. J&J has long-standing and arguably relatively demonstrable liability for its direct action (or inaction) arising from its decades-long control over the marketing and use of contaminated talc product.
I’m pretty sure the tort claimants committee had this included in our brief, but it really wasn’t addressed in this opinion.  But remember, if a future subsidiary of J&J is allowed to go bankrupt (like LTL tried) - that should not negate plaintiff’s ability to pursue J&J’s liability for its independent negligent and intentional acts.   The purpose of a shell corporation/two step bankruptcy is to protect J&J.     If tort claimants can still sue J&J after the shell corporation is granted bankruptcy protection, it moots the very reason for the shell corporation’s bankruptcy. The breadth of the stay - and J&J’s potential inclusion in the stay despite its independent liability - is everything. 
That argument was not necessary to resolve the appeal, so it was not addressed by the Third Circuit.  I still think it has merit.

“Our brief”?
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6 minutes ago, Dahobbs said:

I agree with you and you'll see a similar strategy was rejected in 3M earplug litigation. However, here at least, the original bankruptcy court ok'd the stay applying to j&j. If I'm j&j, I do another merger and take stab at it. 

J & J’s lawyers at least did not shoot their own dicks in the spectacular way that 3M did in CAE (given the horrible things they said about the MDL judge in their bankruptcy pleadings).

I think I read an article in Bloomberg or Reuters today where J&J’s counsel said they were going to ask for a rehearing and maybe seek cert.   Unfortunately, I think you are right about another bite of the apple being in our future.

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J & J’s lawyers at least did not shoot their own dicks in the spectacular way that 3M did in CAE (given the horrible things they said about the MDL judge in their bankruptcy pleadings).
I think I read an article in Bloomberg or Reuters today where J&J’s counsel said they were going to ask for a rehearing and maybe seek cert.   Unfortunately, I think you are right about another bite of the apple being in our future.

What do they have to lose?
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  • 5 months later...

J&J playing more fuck fuck games

https://www.reuters.com/legal/litigation/johnson-johnson-sues-researchers-who-linked-talc-cancer-2023-07-13/

July 12 (Reuters) - Johnson & Johnson has sued four doctors who published studies citing links between talc-based personal care products and cancer, escalating an attack on scientific studies that the company alleges are inaccurate.

J&J's subsidiary LTL Management, which absorbed the company's talc liability in a controversial 2021 spinoff, last week filed a lawsuit in New Jersey federal court asking it to force three researchers to "retract and/or issue a correction" of a study that said asbestos-contaminated consumer talc products sometimes caused patients to develop mesothelioma.

One of the researchers, Richard Kradin, declined to comment. The other two, Theresa Emory and John Maddox, did not respond to requests for comment. Lawyers who have represented the three researchers in similar litigation in the past declined to comment.

J&J is facing more than 38,000 lawsuits alleging that the company's talc products, including its Baby Powder, were contaminated by asbestos and caused cancers including ovarian cancer and mesothelioma. J&J is attempting to resolve those lawsuits, as well as any future talc lawsuits, through an $8.9 billion settlement in bankruptcy court.

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