J&J Uses Cajoling, $9 Billion Offer to Sell New Talc Bankruptcy – Bloomberg Law

A Johnson and Johnson subsidiarys second Chapter 11 with an $8.9 billion offer to settle cancer claims stunned many interested parties, but it was a product of weeks of hustling, out-of-court talks and a nationwide search for victim lawyers willing to cut a deal.

In anticipation of its first bankruptcy case failing, LTL Management LLC, a unit created by the healthcare giant to house mass tort claims that its talc products caused cancer, made sure to fund the pool this time around with a seemingly eye-popping figure thats higher than the offer in the first bankruptcy. It then filed a new bankruptcy case just two hours after the first one was dismissed.

LTL also spent weeks matching up with attorneys eager to persuade their claimant-clients to support the settlement and prodding other more reluctant attorneys to bend their views.

The effort could result in giving J&J more momentum in finally putting to rest a controversial case that has triggered criticism saying its an abuse of the US bankruptcy system. The larger offercompared to only $2 billion in the first bankruptcycould mean more victims will see some payout.

But the companys speedy efforts are also running into some plaintiff attorneys concerns that its committing fraud and trying to ram through a settlement that wouldnt sufficiently address all victims claims.

J&J says the settlement now has the purported support of up to 80,000 claimants, including about 16,000 who are represented by a lawyer, Mikal Watts, whose role in the case grew in recent months.

Negotiations continued between the Debtor and J&J, and various plaintiff law firms, John Kim, chief legal officer of LTL, said in a first-day declaration filed with its second bankruptcy filing. Those negotiations ultimately culminated in an agreement with thousands of claimants on a broad outline of terms for a plan of reorganization.

On April 4, LTL filed its second Chapter 11 filing, containing the new settlement offer, roughly two hours after the US Bankruptcy Court for the District of New Jersey formally dismissed its first bankruptcy case.

The formal dismissal seemed inevitable after the US Court of Appeals for the Third Circuit rebuked in January J&Js first attempt to use bankruptcy to limit and resolve the claims.

Facing the near certainty of its bankruptcy case being tossed, LTL ramped up settlement talks with attorneys in the weeks leading up to the formal dismissal, multiple people with knowledge of the talks said.

Some of the lawyers backing the plan didnt formally pledge their support until the two hour window between bankruptcies, they said.

The new bankruptcy filing immediately allowed LTL to again halt ongoing multi-district litigation over claims that some J&J products contained asbestos that caused cancer and mesothelioma. J&J says its products are safe.

The day after the second LTL case was filed, Judge Michael Kaplan of the US Bankruptcy Court for the District of New Jersey again paused the lawsuits against J&J. He later narrowed the protection to only prevent trials but allow new talc-related lawsuits to be filed.

J&Js new offer frustrated many attorneys who led multi-district litigation. J&J was largely unable to strike a deal with those firms, many of which were members of a select committee representing claimants in LTLs first bankruptcy.

Thats when Watts, the prominent plaintiffs attorney who negotiated a multi-billion dollar settlement in the PG&E California wildfires bankruptcy, entered the fray.

Watts said he reached out to other plaintiffs attorneys in the two weeks before the new filing, assisting an effort by J&J counsel Jim Murdica of Barnes & Thornburg, to drum up support for the new settlement offer.

He had been speaking with J&J, but his day-to-day involvement ramped up in mid-March, he said. The term sheet was negotiated during the week of March 17, Watts said.

I needed to understand what firms representing claimants wanted to see in the deal, Watts said. There was very much careful collaboration.

With the new funding in hand and a new filing imminent, lawyers for LTL and J&J moved quickly in the roughly two hours between bankruptcies to solidify other plaintiff attorneys support .

During that time, LTL reached out to plaintiffs attorneys, including Majed Nachawati, about the new resolution, he said. Nachawati, who represents about 5,000 claimants, has publicly supported the plan.

Im always open to listening, and thats when we had a discussion, Nachawati said.

J&J continued to rally support for the proposal during the two-hour window. The company landed the support of Jim Onder, who represents about 20,000 claimants. His support was notable because he was one of the few attorneys from the talc claimant committee in the first bankruptcy who backed the new offer.

But some attorneys who backed the deal during the two hours later backtracked, underscoring the frantic nature of the brief window.

I dont think J&J, the mothership, should get out of exposure just by setting some arbitrary amount theyre willing to put in a settlement pot, Mark Lanier, who represents around 30 claimants, said. The firm Seeger Weiss has also rescinded its public support of the deal.

J&J is publicly saying it has agreed to a settlement. But negotiations are still ongoing, according several people involved in the talks.

Theres many things to work through, Nachawati said.

LTLs proposal would need approval from 75% of total claimants voting on the bankruptcy plan. And J&J could find itself short.

There is still a possibility that a higher settlement amount may be needed to pass the 75% hurdle, according to a Bank of America report, written by analyst Geoff Meacham and others.

J&J may need to raise the offer to get further support. But any incremental amount would likely be within a few billion, said the report, issued on April 5.

J&J remains confident that itll get the deal through.

We remain confident that thousands more will join once this plan is allowed to be put out for a vote, Erik Haas, J&Js worldwide vice president of litigation, said in a statement to Bloomberg Law.

With assistance from Alex Wolf

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J&J Uses Cajoling, $9 Billion Offer to Sell New Talc Bankruptcy - Bloomberg Law