Expanded Talc Claim Committee Nixed In J&J Unit’s Ch. 11

A New Jersey bankruptcy judge denied a slate of motions seeking to expand the talc claimants committee in the Chapter 11 case of a Johnson & Johnson unit, saying that the panel’s current composition adequately represents the interest of people allegedly injured by the company’s talc products.

U.S. Bankruptcy Judge Michael B. Kaplan said the 11 current members of the committee have not been accused of breaching their fiduciary duties to represent all talc claimants and that the group as it exists now has been working well. Disrupting the status quo could harm LTL Management LLC as it pursues a talc settlement.

The court made its decision based on Section 1102(a)(4) of the bankruptcy code, which allows the Office of the U.S. Trustee to expand the committee if such an expansion is necessary to provide adequate representation for a creditor constituency. In the LTL Management case, five talc claimants had petitioned the bankruptcy court for appointment to the committee, which has already taken various forms in the proceedings.

Originally appointed by the bankruptcy administrator in the North Carolina bankruptcy court where the Chapter 11 case was initially filed, the committee has been split into two groups representing mesothelioma claimants and ovarian cancer claimants; fused back into one cohesive committee, expanded to 16 members; and reduced back to its original 11-member makeup.  

Attorneys for the movants argued that the expansion was needed to provide adequate representation in the form of increased diversity of claimants based on race, residency, nationality, nature and severity of illness, and claim value.

While Judge Kaplan said those intentions were honest, he determined that no additional representation was needed on the committee.

The Chapter 11 case was spurred by roughly 38,000 lawsuits filed by individuals and estates accusing Johnson & Johnson of hiding asbestos in its talcum powder products. J&J spun off LTL Management from a subsidiary, assigned it the company’s massive tort liability, and placed it into bankruptcy in North Carolina in October. The corporate transactions are what is known as a “Texas two-step,” which allows a company to retain its assets and commit to funding a claims trust in the bankruptcy without filing for bankruptcy itself. The case was later transferred to New Jersey, where J&J is headquartered.

LAW360: https://www.law360.com/articles/1490035/expanded-talc-claim-committee-nixed-in-j-j-unit-s-ch-11

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