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(Reuters) – A Delaware bankruptcy judge said Tuesday she was unsure of an offer from people with talc-related personal injury claims to prevent Johnson & Johnson from taking action they say , could move valuable assets beyond their reach.
U.S. bankruptcy judge Laurie Selber Silverstein in Wilmington, Delaware, commented during a virtual hearing on the petition of a group of talc claimants in the Chapter 11 bankruptcy of the former talc supplier of J&J, Imerys Talc America, to prohibit J&J from pursuing a transaction that would separate its talc-related liabilities from its assets.
The people seeking the injunction hold personal injury claims against Imerys, which is pursuing a reorganization plan that would set up a trust to compensate the bodily injury claimants and seek compensation from J&J to fund the trust. J&J’s alleged indemnification obligations, which it disputes, stem from a series of supply agreements between the two companies.
J&J is facing lawsuits from tens of thousands of plaintiffs alleging that baby powder and other talcum products contained asbestos and caused cancer. The plaintiffs include women with ovarian cancer and others battling mesothelioma. J&J maintains that its talcum-based consumer products are safe.
Imerys has been named co-accused in numerous talc-related lawsuits and ultimately filed for bankruptcy to settle the dispute in 2019.
Reuters reported in July that J&J was considering a plan to separate liability for talc-related litigation in a newly formed entity that would then go into bankruptcy. The health care conglomerate could do so under Texas’ “mergers that divide” law which allows a company to split into multiple entities. J&J has neither confirmed nor denied its intention to continue with the breakaway merger.
A lawyer for talc claimants, Natalie Ramsey of Robinson & Cole, argued that the transaction, if it were to occur, would violate the automatic stay protecting bankrupt entities from efforts to collect debts owed or seize assets debtors.
Silverstein said she was “struggling” with the situation and would need a few days to make a decision.
“I find it hard to understand this because [an automatic stay] violation as opposed to maybe something else, ”the judge said.
Ramsey told the judge that Imerys’ right to compensation under its contract with J&J is a property right. An effort to separate J & J’s talc liabilities from its valuable assets and to place the entity with the talc liabilities in bankruptcy would adversely affect its ability to meet these indemnification obligations and, therefore, the rights. of Imerys property, she said.
“It would be like taking the sports car from the debtors and bringing back a battered car,” she said.
Ramsey argued that such a transaction would be a “targeted act” to control Imerys ownership and therefore violate the automatic stay. She urged the judge to dismiss J&J’s claim that preventing him from moving forward with a divisive merger would interfere with its normal business operations.
Theodore Tsekerides of Weil Gotshal & Manges, representing J&J, said the plaintiffs were trying to ban the company from using legal restructuring tools. The plaintiffs have not shown that this type of transaction by J&J would cause prejudice, he added.
“As a charity, the motion is a burning mess,” he said.
Separately, a group of cancer victims filed papers Tuesday in Missouri state court in an attempt to prevent J&J from filing for bankruptcy on its talc-related obligations.
The case is In re Imerys Talc America, Inc., US Bankruptcy Court, District of Delaware, No. 19-10289.
For the Civil Liability Plaintiff Committee: Natalie Ramsey, Mark Fink and Michael Enright of Robinson & Cole, Rachel Strickland, Jeffrey Korn and Stuart Lombardi of Willkie Farr & Gallagher and Kami Quinn and Heather Frazier of Gilbert
For Johnson & Johnson: Theodore Tsekerides, Diane Sullivan, Gary Holtzer and Ronit Berkovich from Weil Gotshal & Manges and Patrick Jackson from Faegre Drinker Biddle & Reath
For Imerys Talc: Jeffrey Bjork, Kimberly Posin, Helena Tseregounis and Richard Levy from Latham & Watkins and Mark Collins, Michael Merchant, Amanda Steele and Brett Haywood from Richards Layton & Finger
J&J EXCLUSIVE plans to bankrupt talc liabilities