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(Reuters) - The judge overseeing the bankruptcy of Johnson & Johnson's subsidiary that holds its talc liabilities is considering a transfer of the proceeding out of North Carolina.
U.S. Bankruptcy Judge Craig Whitley in Charlotte issued an order on Tuesday instructing the bankrupt entity, LTL Management LLC, to explain why he shouldn't send the case to another court. His order notes that not only is most of the talc-related litigation against the debtor located in New Jersey, but that is also where LTL and J&J's principal assets, employees and headquarters are located.
Whitley said in his order that he has authority to transfer a case if he determines it's in the interest of justice or more convenient for the parties involved.
"It is unusual for the court to invoke this rule on its own motion; however, this is a highly unusual case," Whitley wrote in his order.
The judge's order comes about two weeks after J&J – which is not itself in bankruptcy – shifted its talc liabilities into LTL, a new entity and then placed it into Chapter 11 in an effort to resolve thousands of claims alleging its products, including baby powder, cause ovarian cancer and mesothelioma.
LTL is represented in the bankruptcy by Jones Day.
A government bankruptcy watchdog has also called on the judge to transfer the case to New Jersey. U.S. Bankruptcy Administrator Shelley Abel said J&J should not be permitted to “manufacture” a presence in North Carolina, where other large, asbestos-related bankruptcies have occurred.
The judge and Abel both noted that LTL was only established in North Carolina two days before the bankruptcy was filed.
Whitley also said his court is already strapped, saying there are five other mass tort bankruptcies pending in his district now.
A representative for LTL and J&J did not immediately respond to a request for comment.
A hearing on the matter is set for Nov. 10.
Plaintiffs firms have denounced J&J’s use of the bankruptcy system to defend itself against talc litigation, noting that the parent company itself is financially healthy.
The company stopped selling baby powder in the United States and Canada in May 2020, in part due to what it called "misinformation" and "unfounded allegations" about the talc-based product. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.
LTL has asked Whitley to issue an order halting ongoing talc litigation against J&J while the bankruptcy proceeds. The judge declined to do so last week but is giving the debtor another shot at a hearing beginning on Nov. 4.
In June, the U.S. Supreme Court declined to hear J&J's appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company's talc caused their ovarian cancer. J&J has prevailed in other recent talc cases, however.
The case is In re LTL Management LLC, U.S. Bankruptcy Court, Western District of North Carolina, No. 21-30589.
For LTL: Gregory Gordon, Dan Prieto, Amanda Rush and Brad Erens of Jones Day; and Rick Rayburn, Jack Miller and Matthew Tomsic of Rayburn Cooper & Durham
For J&J: Jessica Lauria of White & Case; and Hillary Crabtree of Moore & Van Allen
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