Bankruptcy Judge Must Prioritize Claimants’ Interests, Not Lawyers’ Profit-Seeking Motives
Following the announcement earlier this month that Johnson & Johnson will resolve approximately 60,000 talc claims through the bankruptcy process, plaintiffs’ lawyers have been desperately trying once again to prevent fair resolution outside of expensive and time-consuming litigation. Chief Judge Michael Kaplan, U.S. Bankruptcy Judge for the District of New Jersey, is overseeing this case. He previously denied plaintiffs’ efforts to dismiss earlier talc bankruptcy proceedings, only to have his decision overturned by the Third Circuit.
Yesterday, Judge Kaplan heard arguments in a hearing lasting more than 9 hours about whether the automatic stay in LTL’s second Chapter 11 case, filed on April 4, should extend to include talcum powder lawsuits against parent company Johnson & Johnson. He has indicated he will rule tomorrow.
The voluntary Chapter 11 bankruptcy process is an essential step to resolving the legal morass that has arisen over many years in claims related to talcum powder. Addressing litigation claims is a valid bankruptcy purpose and has been historically recognized by courts across the country. Resolution of mass-tort liabilities in bankruptcy court has been a key tool for U.S. businesses since the Bankruptcy Code was first enacted in 1978.
By contrast, plaintiffs’ lawyers want to continue to bring their cases in a flawed mass tort system where high-dollar awards, low evidentiary standards, and low barriers of entry are the norm. LTL Management has reached agreements with over 60,000 claimants as part of a global resolution and has agreed to contribute up to $8.9 billion over 25 years.
In yesterday’s proceedings, it was suggested that plaintiffs’ lawyers stand to lose over $780 million if claims are removed from the tort system and resolved through bankruptcy. It is readily apparent that the plaintiffs’ lawyers have an overwhelming financial stake in preserving the status quo, but that should in no way impact Judge Kaplan’s handling of the bankruptcy filing. Resolution of these claims should prioritize the best interests of claimants – not the profit-seeking motives of their lawyers.
Additionally, plaintiffs’ lawyers have attempted to claim a common interest privilege with the U.S. Trustee in the case, supposedly a neutral party representing the interests of the U.S. government and taxpayers. It is not immediately clear what the nature of the common interest is between these parties or why they have asserted such a privilege.
There can be no dispute but that the traditional tort system has failed all involved in the talc litigation with the exception of the plaintiffs’ lawyers and a few select claimants. If the goal is to provide a level playing field, rather than a “race to the courthouse” for talc claimants, then the bankruptcy system is the only viable solution. It is encouraging that a substantial number of claimants recognize this and have agreed to resolve their cases under Chapter 11. If the objective for the remaining claimants is to reach a fair resolution of their claims, they likely will consider doing so as well. But when making any such determination, their lawyers must make certain to prioritize the interests of their clients ahead of their own profit motives.