Jones Day remains in J&J bankruptcy amid calls to end case

Cancer patients and widowers this week urged a New Jersey judge to dismiss a Chapter 11 bankruptcy that would allow Johnson & Johnson to end some 38,000 talcum powder lawsuits consolidated in New Jersey and California.

Addressing one of the primary reasons for the hearing, U.S. Bankruptcy Judge Michael B. Kaplan said he would, for now, allow Jones Day to continue representing LTL Management but may change his mind by the next hearing in January. Last week, U.S. Trustee Andrew Vara objected to Jones Day representing both LTL Management and J&J, citing a conflict of interest.

Florida widower William Henry, whose wife Debbie Henry died of ovarian cancer he alleges was caused by using J&J's baby powder daily, appeared Wednesday to ask Kaplan to dismiss the bankruptcy petition filed by J&J's new subsidiary, LTL Management.

"As I held her hand and held her close, her heart stopped," Henry told Kaplan. "There can be no apologies. There can be no do-overs. Debbie's gone. Please hear the 38,000 echoes of this voice. We are people, not numbers."

Henry was one of several talc powder claimants who appeared in person or remotely to question the legitimacy of the bankruptcy case that Democratic Sen. Elizabeth Warren of Massachusetts and other Congress members have called an "effort to manipulate bankruptcy laws" and "exploit a loophole in the bankruptcy law."

The committee of talc claimants and New York attorney Robert J. Stark of Brown Rudnik LLP used most of their time at the hearing arguing to dismiss LTL Management's bankruptcy entirely.

"LTL Management LLC ... has only one purpose, and that's to shelter J&J, and by J&J, I mean the non-debtor attributes of the J&J conglomerate, the empire," Stark said. "It was created literally hours before it filed for bankruptcy. It had one stated purpose, which was to file for bankruptcy."

"It has no business. It doesn't buy anything, doesn't sell anything. It doesn't produce anything, doesn't deliver anything. It does not participate in the commercial world," Stark said.

Arguing on LTL's behalf, Gregory M. Gordon of Jones Day said J&J spent $3.5 billion over the past five years in indemnity payments relating to the talc litigation and he expects new lawsuits will continue to be filed for decades. He reiterated J&J's standing argument that its products do not cause cancer and experts who say they do are not credible.

"All the plaintiffs really have to offer is what we would characterize as junk science," Gordon said. "Their primary expert ... testimony ... was viewed to be practiced and to employ misdirection and evasiveness. It is at best disingenuous, not credible, and unsupported by any respectable community of scientists."

Gordon went on to say while J&J has won the majority of the talc trials held so far, "there was a lottery-like aspect to the results in those cases."

"The best example of that is the case I referred to earlier, which is the Ingham case that generated almost a $4.7 billion verdict," Gordon said. "That was for 22 claimants. It was reduced on appeal, but it obviously wasn't completely reversed on appeal and an effort to have that matter heard by the Supreme Court failed."

With California Attorney General Rob Bonta and 23 other state AGs objecting this year to the Chapter 11 plan that would have allowed Purdue Pharma and its founder, the Sackler family, to escape all current and future opioid lawsuits, public criticism over corporate bankruptcy is at an all-time high. Central to that criticism is the issue of forum shopping.

After Purdue Pharma, headquartered in Stamford, Connecticut, filed for bankruptcy in the one-judge district of White Plains, New York, critics said the pharmaceutical giant did so because the Sacklers believed the judge in that district, Robert Drain, would give them a favorable ruling.

As critical voices from state attorney generals and the public grew louder, Warren and Republican Sen. John Cornyn of Texas introduced legislation in September aimed at ending corporate forum shopping.

In a late breaking development Thursday, Purdue Pharma's bankruptcy plan that would have had the Sacklers pay $4.5 billion as part of a settlement to end its liability in the national opioid litigation was overturned by U.S. District Judge Colleen McMahon in New York, after California and several other states filed an appeal.

J&J's bankruptcy plan, while structured differently, would similarly allow it to pay $2 billion to exit a nationwide litigation. However nothing about its bankruptcy strategy has gone to plan thus far. Perhaps the biggest setback came in November, after LTL's bankruptcy case, filed in J&J's preferred venue of North Carolina, was moved to New Jersey. In re: LTL Management LLC, 21-30589. (N.J. Bankruptcy Ct., filed Oct. 14, 2021).

Before invoking the rarely used power of transferring a case to another venue, U.S. Bankruptcy Judge Craig Whitley in North Carolina said J&J more than forum shopped, "it manufactured a forum" when it created LTL Management to hold liabilities in the talcum powder litigation days before it announced it was filing for bankruptcy.

J&J was able to create LTL by using a corporate restructuring strategy known as the Texas Two-Step. Under a Texas divisive merger statute, J&J dissolved one of its baby powder-making subsidiaries, old Johnson & Johnson Consumer Inc. and created two new ones, J&J CI and LTL Management. LTL was the company J&J dumped all talc liabilities into.

J&J CI is worth $60 billion, Gordon said in court Wednesday. Its parent company, Johnson & Johnson, is now worth $455 billion as of Thursday.

J&J did not respond to an email inquiry asking for the company's response to Warren's congressional letter asking it to end LTL's bankruptcy.