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Bankruptcy Judge Craig Whitley sided with lawyers for more than 38,000 people who have sued J&J over claims one of the company’s most recognized products caused cancer and other health problems. The ruling, over whether the lawsuits can continue during bankruptcy proceedings, is just the opening move in what is likely to be a long court fight, Bloomberg News reported. Judge Whitley rejected J&J’s request for a temporary pause in the cases. But he will consider giving J&J a longer-term shield early next month when the parties come back for a hearing in which the company may be able to offer more evidence to support its position. “It is troubling we can’t find agreements” that back up J&J’s claims, Judge Whitley said during a hearing in Charlotte, North Carolina, on Friday. J&J was unable to find key documents that could prove a corporate restructuring in late 1978 moved responsibility for older talc claims away from the parent. After the number of lawsuits claiming harm from J&J products rose, the company set up a new unit that is responsible for paying off the claims and then put that entity into bankruptcy. The unit, LTL Management, will try to negotiate a trust fund that would end all current and future lawsuits related to J&J’s talc products. Earlier this year, the company paid $2.5 billion to about 20 women who blamed J&J’s baby powder for their ovarian cancer. Both the Missouri Supreme Court and the U.S. Supreme Court refused to overturn the verdict.

A bankruptcy judge said that he is unsure whether his North Carolina courtroom is the right venue for a Johnson & Johnson subsidiary to potentially settle tens of thousands of talc-related injury claims and suggested that the case could be moved closer to the consumer goods giant’s New Jersey headquarters, WSJ Pro Bankruptcy reported. Judge J. Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C. also on Wednesday scheduled a November hearing over whether the J&J subsidiary placed into chapter 11 last week should be moved to a bankruptcy court in Delaware or New Jersey, where thousands of talcum-related injury lawsuits have been litigated for years. J&J formed the subsidiary, LTL Management LLC, on Oct. 12, and it filed for bankruptcy on Oct. 14. Filing bankruptcies in states far from corporate headquarters is common practice in large corporate restructurings, but feeds public perception that chapter 11 rules tilt the playing field in favor of large institutions, according to some legal researchers. LTL Management’s chapter 11 filing effectively shifts to North Carolina the fate of nearly 40,000 pending lawsuits alleging talc used in Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. J&J maintains its talc-based products, which it stopped selling in the U.S. and Canada last year, don’t cause ovarian cancer and haven’t contained asbestos. The new J&J subsidiary’s only connections to North Carolina are a bank account and its having been created there, Judge Whitley said. Its chapter 11 filing also raises questions about the corporate reorganization J&J undertook before LTL Management sought bankruptcy protection, the judge said. LTL Management said in a court filing that it has a Bank of America N.A. account in Charlotte. Read more. 

In related news, Johnson & Johnson offered $4 billion to settle with victims of its talc-based powder months before putting one of its units into bankruptcy -- twice the amount it’s now proposing to pay through a forced resolution, Bloomberg News reported. The $4 billion offer was aimed at ending more than seven years of litigation over claims its iconic baby powder caused different types of cancers. J&J faces nearly 40,000 suits targeting its talc-based products, and has agreed to about $3.5 billion in settlements so far, according to court filings. The world’s largest maker of health care products reportedly wanted to split the $4 billion between trusts established to settle current and future suits. The trusts would have been created as part of the 2019 bankruptcy case filed by Imerys Talc America Inc., J&J’s talc miner. Lawyers representing a substantial number of talc plaintiffs rejected the $4 billion settlement offer as part of the Imerys case as too low. Plaintiffs would have each received about $40,000 for their cases on average. J&J last made the proposal in March. After it was rebuffed, the company’s attorneys told their counterparts to prepare for a bankruptcy filing by a J&J unit later in the year. Read more. 

A bankruptcy judge in Richmond, Va., on Tuesday said he would "quickly" decide the fate of a lawsuit against alternative legal services provider UnitedLex Corp. and Gary LeClair, the co-founder and longtime leader of defunct law firm LeClairRyan, Reuters reported. Bankruptcy Judge Kevin Huennekens asked few questions during a two-hour hearing Tuesday to consider amended claims by chapter 7 trustee Lynn Tavenner, who is overseeing the dissolution of once-leading Richmond law firm LeClairRyan. "I won’t be keeping everyone in suspense," Judge Huennekens said of his plans to decide the case. Tavenner alleges that a 2018 joint venture between LeClairRyan and UnitedLex added more debt to the struggling law firm while improperly handing UnitedLex control over LeClairRyan's operations and its intellectual property. The trustee also accuses LeClair of enriching himself prior to his firm's 2019 collapse. The complaint described LeClairRyan as a "Ponzi scheme" that used capital contributions from new lateral hires to pay out legacy shareholders. Both UnitedLex and LeClair have denied Tavenner's claims. Thomas McKee, a Greenberg Traurig shareholder representing UnitedLex and its related entities, called the allegations "vague" and "conclusory" at Tuesday's hearing.

A ruling on once-forgotten subordinated debt issued by Lehman Brothers before its collapse could yield a huge payday for Deutsche Bank AG and other distressed-debt investors, Bloomberg News reported. Holders of subordinated notes issued out of one of Lehman’s European subsidiaries known as “enhanced capital advantaged preferred securities,” or ECAPS, must be paid before other claims are satisfied, judges in London’s Court of Appeal said in a judgment on Wednesday. The ruling could still be subject to yet another appeal at the U.K. Supreme court. Deutsche Bank is the largest holder of ECAPS notes, and led part of the appeal. Other holders include Barclays Plc, Farallon Capital Management and CarVal Investors. In an earlier court case, a judge ruled that investors should share 13.7% of whatever was left after paying higher-ranking creditors, with the rest going to Lehman Brothers Holdings Inc., or LBHI, the ultimate U.S. parent of the collapsed broker-dealer. Wednesday’s ruling will see ECAPS holders take priority over the LBHI claims. “LBHI intends to seek permission to appeal the U.K. Judgment to The Supreme Court of the United Kingdom,” a lawyer for the bankrupt lender said in a filing on Wednesday. King Street Capital Management and Elliott Management teamed up with LBHI to form a joint venture called the Wentworth Group that would share claims based on loans that the U.S. parent made to its European subsidiary. King Street is also a large ECAPS holder and will likely receive a share of the pot either through the notes or the LBHI venture.

Johnson & Johnson used the lenient venue-selection rules of U.S. bankruptcy law to push tens of thousands of talc-related cancer claims to its bankruptcy court of choice, roughly 600 miles south of the company’s New Jersey headquarters, the Wall Street Journal reported. The New Brunswick, N.J consumer goods giant follows other companies and nonprofits that have filed chapter 11 cases in venues far from their headquarters to weather lawsuits over harmful products or other alleged wrongdoing. J&J formed a new Texas subsidiary to carry its talc liabilities, then converted that entity to a North Carolina-based company days before it filed for bankruptcy. The chapter 11 filing last week effectively shifts to the U.S. Bankruptcy Court in Charlotte, N.C., the fate of nearly 40,000 pending lawsuits alleging talc used in Johnson’s Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. “Further manipulation of the venue statute by creating entities for the sole purpose of filing in a particular jurisdiction does push this to an extreme that is likely to undermine faith in the bankruptcy system,” said Prof. Stephen Lubben of Seton Hall University School of Law. Congress is considering making forum selection rules more restrictive. The rules have long been flexible in allowing companies their preferred location for filing for bankruptcy protection. Sens. Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) reintroduced legislation last month that would require corporations or wealthy individuals to file chapter 11 either in their home state or where they have significant assets. Congressional Democrats criticized J&J’s decision to put its talc claims into chapter 11, describing it as an abuse of the bankruptcy system. J&J has said bankruptcy provides a forum to fairly compensate claimants, and likely quicker than through the traditional trial system. The company has defeated some lawsuits, lost others and maintained that its baby powder is safe.