WEBVTT - J&J, 3M's Chap 11 Play in Talc, Earplug Mass Torts 0:00:14.360 --> 0:00:16.880 Well, Welcome to the Votes and Vergs podcasts hosted by 0:00:16.880 --> 0:00:21.360 Bloomberg Intelligence, the investment research arm of Bloomberg LP. In 0:00:21.400 --> 0:00:24.440 this podcast series, we talk about the intersection of business 0:00:24.600 --> 0:00:27.520 policy and law. My name is Holly Frome. I'm an 0:00:27.600 --> 0:00:32.360 analyst with Bloomberg Intelligence covering consumer industrials and healthcare litigation. 0:00:32.800 --> 0:00:35.760 Today's podcast will focus on mass sport litigation and the 0:00:35.840 --> 0:00:39.519 company's attempts to use bankruptcy proceedings to resolve those cases. 0:00:40.000 --> 0:00:42.360 I'm delighted to be joined today by Negie, the Beluku 0:00:42.440 --> 0:00:46.720 bankruptcy attorney and litigation analyst with Bloomberg Intelligence. Thanks Nigysa 0:00:46.800 --> 0:00:49.720 for joining me today. I wanted to talk about J 0:00:49.800 --> 0:00:52.199 and J. Johnson and Johnson, a company facing tens of 0:00:52.240 --> 0:00:56.360 thousands of lawsuits against it and its consumer subsidiary over 0:00:56.440 --> 0:01:00.360 allegations it's calcolm powder causes, ovariant answer and mess Ocailyoma 0:01:01.240 --> 0:01:04.760 cases were filed in cederal and state court. Federal cases 0:01:04.800 --> 0:01:08.200 were consolidated in multi district litigation in New Jersey, and 0:01:08.240 --> 0:01:10.440 the verdict out of state court have generally been mixed, 0:01:10.480 --> 0:01:14.000 with one notable verdict outa Missouri for two point one 0:01:14.040 --> 0:01:17.880 billion dollars. Then in twenty twenty one, Johnson and Johnson 0:01:17.959 --> 0:01:22.520 filed from bankruptcy for a subsidiary using something called the 0:01:22.560 --> 0:01:26.200 Texas two step. I was wondering, can you explain what 0:01:26.280 --> 0:01:29.520 the Texas two step is and how Johnson and Johnson 0:01:29.600 --> 0:01:32.080 utilized that process? Sure? 0:01:32.160 --> 0:01:34.839 So, what do we call what we're calling the Texas 0:01:34.880 --> 0:01:39.520 two step. It's also it's a divisional merger. It's done 0:01:39.680 --> 0:01:44.600 under the Texas Business Organization Code and broadly speaking, for 0:01:44.760 --> 0:01:48.960 Jane's purposes and for any solvent company using it. What 0:01:49.080 --> 0:01:53.760 it does it makes bankruptcy an option available to companies 0:01:53.800 --> 0:01:57.040 that are not actually in distress. So in October of 0:01:57.200 --> 0:02:00.720 twenty twenty one, Jane j took a serious steps to 0:02:00.800 --> 0:02:06.080 allocate it's talk related liabilities that were with all JJCI 0:02:06.320 --> 0:02:11.160 to new subsidiary. It's called that the LTL management. While 0:02:11.280 --> 0:02:14.200 almost all of the assets were left behind in the 0:02:14.240 --> 0:02:18.800 new jjcis in this new sub and finally not the 0:02:18.840 --> 0:02:22.520 simple but LTL was oftim really put into bankruptcy. I 0:02:22.560 --> 0:02:24.880 do want to know that the Textas two step is 0:02:24.919 --> 0:02:28.960 controversial obviously in the bankruptcy context, but division merger statues 0:02:29.000 --> 0:02:32.280 are perfectly good line to access Delaware two for that 0:02:32.360 --> 0:02:36.240 matter with some slight differences. At its core, what the 0:02:36.280 --> 0:02:40.560 statue does it breaks up the company, so it accomplishes 0:02:41.120 --> 0:02:46.480 the opposite of a merger. It's a corporate structuring statue 0:02:46.520 --> 0:02:49.880 that doesn't deem sort of the separation to be an 0:02:49.919 --> 0:02:53.760 assignment or a transfer. That's typically important because companies use 0:02:53.800 --> 0:02:58.959 it to avoid certain restrictions and contracts for example. But well, 0:02:59.200 --> 0:03:02.359 I Google be talking to about Jane j and U 0:03:03.000 --> 0:03:06.680 and beyond sort of in its two bankruptcy attempts, but 0:03:07.120 --> 0:03:10.480 that were file based on the statue. But the statue itself, 0:03:10.520 --> 0:03:13.639 that's still perfectly good law. It's actually it actually hasn't 0:03:13.720 --> 0:03:17.639 been challenged in any of the bankruptcies in the bankruptcy 0:03:17.680 --> 0:03:19.840 context when we're using Texas to step. There's a lot 0:03:19.880 --> 0:03:25.680 of layers to it. In Jane Jay's bankruptcy, as are 0:03:25.800 --> 0:03:29.880 many of these tour bankruptcies. Are is the company was 0:03:29.919 --> 0:03:34.399 accompanied by funding agreement, which is truly becomes a cornerstone 0:03:34.440 --> 0:03:38.160 of this chapter elevens where the parent purports to cover 0:03:38.360 --> 0:03:44.040 the tort obligations. Ironically, this spunding agreement also turned out 0:03:44.080 --> 0:03:48.280 to be its downfall. Ultimately the third circuit and I 0:03:48.280 --> 0:03:52.119 guess to answer the question why bankruptcy, why all these 0:03:52.120 --> 0:03:55.560 efforts to be in it? For those that support it, 0:03:57.160 --> 0:04:00.080 the claim is that all this is done in the 0:04:00.120 --> 0:04:05.120 name of efficiency. Basically, we know in bankruptcy majority binds 0:04:05.160 --> 0:04:08.000 hold out also bind's future claimants, so you can set 0:04:08.080 --> 0:04:12.760 up future claims. Bankruptcy also could ensure a level of 0:04:12.760 --> 0:04:18.679 playing field for all present and future victims. And while 0:04:18.760 --> 0:04:21.160 it may not be great for those few claimants who 0:04:21.200 --> 0:04:25.960 have secret judgments or those that may end up going 0:04:26.000 --> 0:04:30.160 to trial, those supportive of it will say that looking 0:04:30.200 --> 0:04:36.320 at the big picture, bankruptcy here could provide a way 0:04:36.480 --> 0:04:43.040 to pay all claimants and do so quicker that than 0:04:43.160 --> 0:04:44.200 the MDL system. 0:04:44.240 --> 0:04:50.119 On interesting, So, LTL was the company to which jj 0:04:50.200 --> 0:04:53.760 C Johnson Johnson Consumer business business is talk light though 0:04:53.760 --> 0:04:58.400 it was allocated, and I understand the bankruptcy court in 0:04:58.400 --> 0:05:04.799 which LTL filed was North Carolina. That court transferred the Kingston, 0:05:04.800 --> 0:05:08.480 New Jersey. Can you tell us why LTL filed in 0:05:08.560 --> 0:05:10.000 North Carolina in the first place? 0:05:11.120 --> 0:05:15.560 So yeah, So LTL was incorporated in Texas because this 0:05:15.839 --> 0:05:20.400 was a Texas statue it was created under, and I 0:05:20.480 --> 0:05:24.360 believe later that day switched to the North Carolina company 0:05:25.160 --> 0:05:28.360 for exactly the purpose of filing for bankruptcy in North 0:05:28.400 --> 0:05:32.000 Carolina until then, So this was some time ago. Obviously, 0:05:32.640 --> 0:05:36.039 North Carolina was the only court that had dealt with 0:05:36.160 --> 0:05:41.920 divisional mergers under this Texas statue, and the reasoning is 0:05:41.960 --> 0:05:45.640 obviously more complex than that. Also, generally speaking, it is 0:05:45.800 --> 0:05:49.680 harder to dismiss a case in the Fourth Circuit as 0:05:49.720 --> 0:05:53.599 a bad faith filing. It's also easier to extend the 0:05:53.640 --> 0:05:56.679 automatic state to non debt are in the Fourth Circuit 0:05:57.800 --> 0:06:01.800 and sometimes passed from what we know since JJ wasn't wrong. 0:06:01.960 --> 0:06:06.520 The Fourth Circuit has yet to address some of these 0:06:06.520 --> 0:06:11.080 issues in the Texas two stepcases, and these cases are 0:06:11.080 --> 0:06:13.680 there now are still moving through the appeal process. But 0:06:13.800 --> 0:06:16.680 the North Carolina bankerancy courts and the higher course, including 0:06:16.720 --> 0:06:20.279 the Fourth Circuit, have generally been much more accepting of 0:06:20.360 --> 0:06:24.400 the strategy that the Third Circuit has been. For example, 0:06:24.480 --> 0:06:27.400 where JANJ ended up going to New Jersey. 0:06:30.160 --> 0:06:33.880 Interesting, you mentioned an automatic stay. Can you explain what 0:06:33.920 --> 0:06:35.720 the automatic state is in bankruptcy? 0:06:36.360 --> 0:06:40.520 Yeah, So the automatic stay is one of the fundamental 0:06:40.600 --> 0:06:45.880 debtor protections. So the bankruptcy provides immediately upon filing, the 0:06:45.920 --> 0:06:48.440 automatic state goes into effect, and it's what it is 0:06:48.520 --> 0:06:53.240 is basically an injunction that prohibits all actions against the debtor. 0:06:53.520 --> 0:06:57.680 There's some exceptions, like governmental actions, but it's supposed to 0:06:57.760 --> 0:07:01.479 provide a briefing spelled for the debtor. So it stops lawsuits, 0:07:02.000 --> 0:07:07.839 it stops collection actions for closures. It may look like 0:07:08.200 --> 0:07:12.320 or feel like a punishment for certain creditors, but it's 0:07:12.360 --> 0:07:17.320 not meant to be what it does. It puts all 0:07:17.400 --> 0:07:20.640 creditors on the same footing. Basically, it creates this level 0:07:20.680 --> 0:07:23.560 of painful as I said, and the expectation is that 0:07:23.720 --> 0:07:27.800 will automatically ultimately facilitate or structuring. 0:07:29.000 --> 0:07:31.800 Got it? So J ANDJ was able to have that 0:07:31.960 --> 0:07:34.880 stay applied to it even though it didn't file for 0:07:34.920 --> 0:07:39.600 bankruptcy for itself. It's subsidiary. Can you explain why JJ 0:07:39.760 --> 0:07:41.880 was able to take advantage of that day even though 0:07:42.320 --> 0:07:45.360 it was not the entity that was filing for bankruptcy? 0:07:45.680 --> 0:07:48.760 Right? So that's when the automatics day becomes stricky in 0:07:48.840 --> 0:07:51.600 an issue and a problem. Sometimes it's when the debtor 0:07:51.640 --> 0:07:54.920 seeks to extend it to third parties, as was the 0:07:54.960 --> 0:07:59.320 case in LTL, and those thirtin parties could be apparent 0:07:59.520 --> 0:08:01.120 like in the case jing J, it could be other 0:08:01.160 --> 0:08:04.880 third parties also not unrelated. So while the state applied 0:08:04.920 --> 0:08:10.320 automatically to LTL as the debtors, no lawsuits against LTL 0:08:10.400 --> 0:08:14.720 could proceed. It's no secret that the goal of the 0:08:14.880 --> 0:08:21.800 entire bankruptcy was to have LTL, as the debtor, extend 0:08:22.640 --> 0:08:27.800 the state to the parent jan J. When assess in 0:08:27.840 --> 0:08:31.120 wanted to extend the state to third parties, the question 0:08:31.200 --> 0:08:35.360 the bankruptcy court primarily asked is whether suits against this 0:08:35.480 --> 0:08:39.960 third party are effectively suits against the debtors, because the 0:08:40.040 --> 0:08:46.120 goal remains to protect the debtor's state and promote restructuring 0:08:46.559 --> 0:08:51.800 of whichever entity that filed. After the case were transferred 0:08:51.800 --> 0:08:57.040 to New Jersey, gan J was able to produce a 0:08:57.200 --> 0:09:02.680 nineteen seventy nine agreement that showed that old JJCI had 0:09:02.760 --> 0:09:08.679 assumed all of the vast majority of how related liabilities. 0:09:09.320 --> 0:09:12.200 So what they were able to accomplish this was convinced 0:09:12.200 --> 0:09:15.640 the court that to extend the state to JANEJ was 0:09:15.679 --> 0:09:20.760 because they were able to show this equivalency of liability 0:09:20.880 --> 0:09:26.240 between jan J and LTL, whereby a suit against Jane 0:09:26.360 --> 0:09:31.360 J would have been one against LTL. So that's was 0:09:31.440 --> 0:09:35.600 the reasoning behind extending the state to JEJ got it. 0:09:37.080 --> 0:09:41.120 So the tal claimants, I'm sure weren't happy about that. 0:09:41.280 --> 0:09:44.320 They eventually moved to dismiss the case, arguing that the 0:09:44.360 --> 0:09:47.760 filing was made in bad faith, and in a ruling 0:09:47.800 --> 0:09:51.400 render in February twenty twenty two, the lower court declined 0:09:51.440 --> 0:09:54.920 to dismiss the case. Can you explain why the lower 0:09:54.920 --> 0:09:58.000 court didn't dismiss the case? Sure? 0:09:58.080 --> 0:10:03.480 So this was Judge Kapl in Jersey Bankruptcy Court. He 0:10:03.760 --> 0:10:09.120 was a pretty lengthy, dense, complex opinion that at his core, 0:10:09.200 --> 0:10:12.120 I think it recognized the short folds a few things, 0:10:12.120 --> 0:10:14.559 So the shortfalls of the NDL system, first of all, 0:10:15.120 --> 0:10:20.640 the benefits of the bankruptcy system for an efficient resolution 0:10:20.760 --> 0:10:25.120 of thought liabilities. And I think underlying all that there 0:10:25.160 --> 0:10:30.400 was perhaps this notion of the means justifying the end. 0:10:31.240 --> 0:10:36.600 There were clear reminders that a bankruptcy would be disastrous 0:10:36.679 --> 0:10:39.480 for Jane J. It was forced to file based on 0:10:39.559 --> 0:10:44.120 the stack liabilities that we have this company that is 0:10:44.320 --> 0:10:49.480 basically more than offering to pay these claims in full, 0:10:50.040 --> 0:10:54.240 and what could claimants possibly ask for more? This is 0:10:54.280 --> 0:10:57.200 really as good as it's probably going to get outside 0:10:57.240 --> 0:11:04.360 of the policy reasons. The ruling indicated that LTL was 0:11:04.520 --> 0:11:08.720 in sufficient financial distress, and that's what you need to 0:11:08.840 --> 0:11:11.600 show that you have a good faith filing. That was 0:11:11.679 --> 0:11:16.120 ultimately reversed. But that's kind of the main reasoning behind 0:11:16.120 --> 0:11:16.560 the ruling. 0:11:19.640 --> 0:11:23.360 And you mentioned that the ruling was eventually reversed by 0:11:23.400 --> 0:11:28.480 the appellate court. That was in January, at least January 0:11:28.200 --> 0:11:32.080 twenty three. Yeah, the third Circuit reverse the lower court 0:11:32.360 --> 0:11:37.320 and dismissed the bankruptcy case. What was the basis for 0:11:37.360 --> 0:11:39.439 the third Circuit's decision. 0:11:40.000 --> 0:11:42.520 So they all went back to financial distress. So the 0:11:42.559 --> 0:11:45.880 Third Circuit found that ALTL was not in financial distress. 0:11:47.360 --> 0:11:49.440 This was interesting. I mean, the good faith standard for 0:11:49.600 --> 0:11:55.160 filing a chapter of bankruptcy hasn't hadn't until then, and 0:11:55.200 --> 0:12:00.240 still in many circuits hasn't been clearly defined. What we 0:12:00.320 --> 0:12:02.480 know we knew is that you don't need to be 0:12:02.520 --> 0:12:05.560 insolvent to file for bankruptcy, but there hadn't been a 0:12:05.600 --> 0:12:08.240 lot set beyond that as to what you actually need. 0:12:09.960 --> 0:12:12.319 If their circuits said a lot more actually clarify this 0:12:13.320 --> 0:12:17.880 in many ways, it demanded what it called imminent and 0:12:18.000 --> 0:12:23.160 apparent financial distress, that being a necessary component of a 0:12:23.280 --> 0:12:27.079 good faith Chapter eleven filing, and that's where the funding 0:12:27.120 --> 0:12:32.000 agreement comes into play. So by this funding agreement, upon filing, 0:12:32.720 --> 0:12:37.640 ALTL had access to over sixty one billion dollars for 0:12:37.760 --> 0:12:41.959 the payment of talk liabilities by the funding agreements, So 0:12:42.040 --> 0:12:43.880 I think there was a floor of sixty one point 0:12:43.920 --> 0:12:48.920 five billion, and just plainly speaking, it just turned out 0:12:49.000 --> 0:12:53.640 it was ultimately tourist for bankruptcy. People. Many will point 0:12:53.679 --> 0:12:57.440 out that there's certainly an irony here. You have those 0:12:57.840 --> 0:13:01.160 proponents of textis to step will point out that what 0:13:01.679 --> 0:13:06.480 the Third Circuit basically did is prohibit a bankruptcy or 0:13:06.480 --> 0:13:10.280 a bank aftentity that clearly had the ability to pay 0:13:10.520 --> 0:13:15.280 creditors in fall from actually proceeding to pay creditors in fall. 0:13:16.360 --> 0:13:18.280 And important to know that what the opinion didn't do 0:13:19.280 --> 0:13:21.679 is that it didn't address the application of the automatics 0:13:21.679 --> 0:13:25.000 stay to Jane j which was kind of a different finding. 0:13:25.280 --> 0:13:29.400 So it really it fell on this good faith standard. 0:13:30.960 --> 0:13:34.360 So in April of this year, Johnson and Johnson filed 0:13:34.440 --> 0:13:37.959 for bankruptcy for subsidiary. Again, can you explain how this 0:13:38.040 --> 0:13:40.240 bankruptcy filing differed from the first one. 0:13:40.840 --> 0:13:45.240 So I think LTL filed second bankruptcy about three hours 0:13:45.520 --> 0:13:49.920 after the first case was officially dismissed, and in many ways, 0:13:50.080 --> 0:13:53.599 obviously not much had changed, right at least from the 0:13:53.640 --> 0:13:58.120 perspective of what the financial conditions of the company were. 0:13:58.520 --> 0:14:04.240 Both Jane and lt HELL had been avoiding trials for 0:14:04.320 --> 0:14:06.240 a year and a half and suits for a year 0:14:06.280 --> 0:14:11.720 and a half. What did change, though, and this was key, 0:14:12.120 --> 0:14:17.240 was the support around a global settlement LTL filed to 0:14:17.440 --> 0:14:24.680 support with support of law firms that represented about sixty 0:14:24.880 --> 0:14:30.960 thousand claimants and a funding agreement that stood at eight 0:14:31.240 --> 0:14:34.800 point nine billions set of the original sixty one point 0:14:34.920 --> 0:14:40.440 five billion, and that funding agreement purported to basically cover 0:14:40.560 --> 0:14:45.160 global settlement that would cover present and future claims as 0:14:45.240 --> 0:14:48.680 well as third party pay your type, suppliers, governmental and 0:14:49.400 --> 0:14:54.040 so forth. LTL did ask for a stay immediate to 0:14:54.200 --> 0:14:58.080 extend the state to JJ again immediately after its file, 0:14:58.720 --> 0:15:01.560 and what was I was able to get this time 0:15:01.640 --> 0:15:05.880 around was modified stay I guess they called it where 0:15:06.200 --> 0:15:10.040 discovery related matters were able to proceed, but the court 0:15:10.440 --> 0:15:15.240 did stay the trials. Also, while new suit I believes 0:15:15.280 --> 0:15:18.920 could be filed, plaintiffs could elect to defer the filing 0:15:18.960 --> 0:15:24.600 of new lawsuits. Actually that saved huge expense all obviously trials. 0:15:24.720 --> 0:15:27.640 Not being able to proceed the trials saves a lot 0:15:27.680 --> 0:15:32.840 of expenses, but not needing being able to defer filing 0:15:32.920 --> 0:15:37.440 of new lawsuits was a huge expense siver also because many, 0:15:37.520 --> 0:15:40.320 if not all, of the sixty thousand new claimants that 0:15:42.280 --> 0:15:47.040 were expected to support the plan actually had a file 0:15:47.120 --> 0:15:51.560 lawsits and now they didn't have to. I believe there 0:15:51.640 --> 0:15:54.600 was one trial eventually allowed down the line, but that 0:15:54.880 --> 0:15:59.400 was decided on a one up basis. Generally speaking, there 0:15:59.480 --> 0:16:02.320 was a lot of relief afforded the second time round, 0:16:02.960 --> 0:16:06.800 though not admittedly not as much as the first bankruptcy 0:16:07.240 --> 0:16:07.720 And what was. 0:16:07.720 --> 0:16:09.800 The outcome of the second Chapter eleventh filing. 0:16:11.000 --> 0:16:15.600 It was dismissed by the bankruptcy court, but not but 0:16:15.720 --> 0:16:17.480 it did spend a few months in makruptcy, so it 0:16:17.640 --> 0:16:25.040 was an immediate Why was it dismissed it twas so, 0:16:26.200 --> 0:16:27.640 I don't know. I don't think I mentioned that, But 0:16:27.760 --> 0:16:30.680 it was in front of the same makeruptcy court where 0:16:30.800 --> 0:16:33.440 the first filing happened, was in front of Judge Kaplan 0:16:33.520 --> 0:16:37.120 in New Jersey, so same judge it and it was 0:16:37.160 --> 0:16:40.000 dismissed very much on the same grounds laid out by 0:16:40.040 --> 0:16:44.960 the Third Circuit just months prior, that there was no 0:16:45.880 --> 0:16:49.280 on a good faith basis that there was no imminent 0:16:49.480 --> 0:16:54.400 and apparent financial distress to this filing. I I think 0:16:54.440 --> 0:16:59.560 it's worth mentioning that Judge Kaplan didn't hide his displeasure 0:17:00.080 --> 0:17:03.560 maybe having to reach this ruling, and it did in 0:17:03.880 --> 0:17:07.439 many ways question whether this standard that the Tir Circuit 0:17:07.480 --> 0:17:12.760 had articulated of imminent and apparent financial distress made sense. 0:17:14.280 --> 0:17:18.720 I'd say that the stake isn't uncommon in the bankruptcy 0:17:18.760 --> 0:17:22.960 circles today. There is this fear that this standard of 0:17:23.080 --> 0:17:28.560 imminent and apparent financial distress may look a lot like 0:17:28.800 --> 0:17:34.159 an insolvency requirement, which we know that there shouldn't be. 0:17:34.160 --> 0:17:36.560 We don't expect that to be. So this concern that 0:17:36.680 --> 0:17:39.280 this wag and see approach to the bankruptcy filing will 0:17:39.400 --> 0:17:44.240 keep out of bankruptcy companies that would really benefit from it. Obviously, 0:17:44.400 --> 0:17:48.560 this change is not a good case that illustrates that 0:17:48.800 --> 0:17:54.600 because it's clearly not near insolvency, but there is concern 0:17:54.680 --> 0:17:58.960 as to how the standard may affect other companies. 0:18:00.119 --> 0:18:03.720 Bankruptcy courts, multiple dismissals. Do you think JANJ received any 0:18:03.760 --> 0:18:06.159 benefit bypiling for bankruptcy and so what? 0:18:07.440 --> 0:18:10.000 So there's a hard question to answer without the benefit 0:18:10.320 --> 0:18:12.800 of perspective, I guess, but I mean a general speaking, 0:18:12.880 --> 0:18:16.040 I say yes. I mean since October of twenty twenty one, 0:18:16.119 --> 0:18:21.840 now it's close to two years, it's avoided trials. It 0:18:21.960 --> 0:18:28.400 avoided suits for a very long time. The bankruptcy court, 0:18:28.400 --> 0:18:32.119 as I mentioned before, applied this modified state during the 0:18:32.200 --> 0:18:34.960 second bankruptcy, and there was a lot of breathing room 0:18:35.800 --> 0:18:38.520 given to the company to change j to allow it 0:18:38.640 --> 0:18:41.600 to focus on settlement or to take some steps towards it. 0:18:42.840 --> 0:18:48.200 I mean bankruptcy is expensive, generally speaking, but so our trials. Ultimately, 0:18:49.320 --> 0:18:52.960 I think it's not an n reasonable price to pay 0:18:53.320 --> 0:18:56.199 for a chance of concluding these suits. And these are 0:18:56.280 --> 0:18:59.240 both present and futurized it will conclude them for good. 0:19:00.080 --> 0:19:05.680 Were successful. Also, I mean this was meant, I think, 0:19:05.760 --> 0:19:10.480 to be a long term appeal process. This was a 0:19:10.800 --> 0:19:14.399 daring strategy when it started. I think the failures along 0:19:14.480 --> 0:19:19.040 the way couldn't have been a major surprise to the company, 0:19:19.640 --> 0:19:26.160 especially the second filing. So and maybe it did create 0:19:26.440 --> 0:19:31.840 this creating slementum from a global settlement. I mean there's 0:19:31.920 --> 0:19:33.639 three M on the other side too, right, do you 0:19:33.920 --> 0:19:37.960 think bankruptcy helped three M reach its settlement? Like, what 0:19:38.200 --> 0:19:41.320 does that? What does that look like for three AM? 0:19:41.560 --> 0:19:43.480 It did. It's not a Texas two step, but it 0:19:43.600 --> 0:19:48.919 did follow a very similar approach to resolving it's towards liabilities. 0:19:50.359 --> 0:19:53.800 Yeah, that's a good question. So, just by way of backround, 0:19:53.800 --> 0:19:56.040 three AM was another company that was facing mass sport 0:19:56.080 --> 0:20:00.840 litigation veterans Military veterans alleged earplugs that they used that 0:20:00.920 --> 0:20:03.680 were supplied to the military were defective and caused hearing loss. 0:20:04.160 --> 0:20:07.560 There were three hundred thousand cases at one point. The 0:20:07.640 --> 0:20:11.439 airplugs were originally manufactured by Arrow, which was a company 0:20:11.520 --> 0:20:14.320 that THREEM acquired. So in twenty twenty two, three M 0:20:14.880 --> 0:20:17.920 tried to put its subsidiary Arrow in bankruptcy during this 0:20:18.160 --> 0:20:20.480 mass wort litigation and get a stay of that litigation 0:20:21.000 --> 0:20:24.000 as to both itself and its subsidiary. Three M ultimately 0:20:24.080 --> 0:20:27.680 didn't get to stay and Arrows bankruptcy finaling was eventually dismissed. 0:20:28.359 --> 0:20:30.080 But in two each of this year, it was announced 0:20:30.119 --> 0:20:32.480 that three M agreed to pay six billion dollars to 0:20:32.560 --> 0:20:36.320 resolve over two hundred and forty thousand claims. Under the 0:20:36.359 --> 0:20:38.840 settlement agreement at three, a M has a walk away 0:20:38.920 --> 0:20:42.440 right if less than ninety eight percent of eligible PLANEIFS degree. 0:20:43.119 --> 0:20:45.960 I don't think bankruptcy helped them settle the case, other 0:20:46.080 --> 0:20:49.760 than to know that it wasn't an option. Unlike Jane J. 0:20:50.240 --> 0:20:52.639 Threem didn't get us today, which if granted, could have 0:20:52.720 --> 0:20:56.359 lowered settlement value due to delay and potential payoffs. But 0:20:56.480 --> 0:20:59.600 I think really simulated talks were their mixed trial outcome, 0:21:00.520 --> 0:21:02.720 their mistrial record, as well as the fact that it 0:21:02.760 --> 0:21:04.879 seemed pretty clear that they were going to lose the 0:21:04.960 --> 0:21:08.080 Eleventh Circuit appeal of the first bell Weather verdict, and 0:21:08.240 --> 0:21:10.639 just by way of background on that, a potentially this 0:21:10.840 --> 0:21:14.200 positive issue in all these like hundreds of thousands of 0:21:14.200 --> 0:21:18.760 cases was whether Threem had what's called a government contractor immunity, 0:21:18.840 --> 0:21:22.040 which is the defense that exists if a contractor supplies 0:21:22.080 --> 0:21:25.439 goods to the military to the military specification and if 0:21:25.520 --> 0:21:28.600 the contractor has worn the government of the risks. The 0:21:28.680 --> 0:21:32.040 lower court found Threem didn't have government contract or immunity, 0:21:32.080 --> 0:21:35.159 and that issue was appealed to the Eleventh Circuit. The 0:21:35.240 --> 0:21:38.240 Eleventh Circuit heard oral argument and it seemed somewhat clear 0:21:38.400 --> 0:21:41.080 during the hearing that the panel was a client inclined 0:21:41.480 --> 0:21:44.360 to affirm the lower court. So three M entered into 0:21:44.560 --> 0:21:47.760 this settlement. There was a separate settlement agreement for cases 0:21:47.800 --> 0:21:51.080 that went to verdict and WAD cases which were closer 0:21:51.119 --> 0:21:53.880 to trial because they were identified for pre trial discovery 0:21:53.920 --> 0:21:57.400 work up prior to the settlement date. And there will 0:21:57.440 --> 0:22:00.600 be a fairness hearing in December because part of the 0:22:00.640 --> 0:22:03.120 settlement is being paid in stock, so the court will 0:22:03.160 --> 0:22:06.480 consider whether the proposed transfer stock by three AM as 0:22:06.520 --> 0:22:12.280 partial consideration in the settlement is fair and that's happening 0:22:12.359 --> 0:22:17.320 on December eleventh. So I think those catalysts were really 0:22:17.400 --> 0:22:21.119 what stimulated the settlement as opposed to a bankruptcy filing. 0:22:21.600 --> 0:22:25.040 Do you think it's easier for Was it easier for 0:22:25.160 --> 0:22:28.400 three a M to reach a settlement outside of bankruptcy 0:22:28.440 --> 0:22:29.880 compared to JANJ for example? 0:22:31.160 --> 0:22:34.440 I think so. And the reason why I think it 0:22:34.600 --> 0:22:41.720 was easier was because with three AM, the injury would 0:22:41.840 --> 0:22:47.040 hear the alleged injury manifested itself not too long after 0:22:47.200 --> 0:22:50.520 usage of the earplugs, whereas cancer, the alleged injury from 0:22:50.600 --> 0:22:53.720 tal competitor could have a latency of twenty to forty years, 0:22:54.400 --> 0:22:57.240 and ear plugs were sold between nineteen ninety nine and 0:22:57.359 --> 0:23:01.200 twenty fifteen, or as stalk was sold over decades and 0:23:01.520 --> 0:23:05.200 Johnson and Johnson pulled the product in twenty twenty. The 0:23:05.280 --> 0:23:09.119 statue and the statue limitations generally runs from the date 0:23:09.200 --> 0:23:12.000 of injuries, so theoretically a person that used the product 0:23:12.119 --> 0:23:15.600 in twenty twenty could perhaps get cancer in twenty forty 0:23:15.640 --> 0:23:17.800 and say that it was caused by TALC and file 0:23:17.960 --> 0:23:21.520 their lawsuit in twenty forty. So the universal cases for 0:23:21.640 --> 0:23:26.000 Johnson and Johnson is still unknown. Whereas I don't expect 0:23:26.000 --> 0:23:28.280 there to be a significant number of new year Plug 0:23:28.400 --> 0:23:31.560 cases filed because sales ceased from twenty fifteen and the 0:23:31.800 --> 0:23:36.320 alleged injury manifests itself relatively quickly, so I think there 0:23:36.400 --> 0:23:38.680 was more visibility as to the number of claimants with 0:23:38.760 --> 0:23:41.639 three a M, which potentially could have made settlement a 0:23:41.720 --> 0:23:45.959 little easier. So we talked about why Johnson Johnson may 0:23:46.000 --> 0:23:49.400 have received the benefit. There's murmuring from filing for bankruptcy. 0:23:49.680 --> 0:23:51.879 There's murmurings that Jane j will attempt to file a 0:23:51.960 --> 0:23:55.600 third bankruptcy proceeding given the prior failures, do you think 0:23:55.680 --> 0:23:57.960 this case would stand a better chance of success? 0:23:59.680 --> 0:24:02.800 True, Well, the second dismissal is now on appeal is 0:24:02.920 --> 0:24:08.280 directly getting appealed to the Third Circuit. Again, LTL is 0:24:08.400 --> 0:24:12.480 not prohibited for filing for bankruptcy. Actually, the TAP Committee 0:24:12.720 --> 0:24:16.400 requested the Bankercy Court to prohibit a third filing within 0:24:16.480 --> 0:24:20.040 a six month period. They were deny that request, and 0:24:20.160 --> 0:24:23.399 also the Bankercy Court continue to encourage parties to negotiate 0:24:23.800 --> 0:24:27.359 as it was dismissing the case. So there's that. I mean, 0:24:27.400 --> 0:24:29.440 I don't know what a third filing mad look like. 0:24:29.640 --> 0:24:33.399 Something does need to change, obviously, and whether that's the 0:24:33.640 --> 0:24:38.200 entity that files, or the conditions of the LTL or 0:24:38.280 --> 0:24:41.320 maybe a much wider settlement. I mean, they said they 0:24:41.359 --> 0:24:45.200 had about sixty percent of claimants on board last time, 0:24:45.960 --> 0:24:52.479 with very strong opposition by the Tap Committee. Obviously, I mean, 0:24:52.600 --> 0:24:57.119 a different circuit help in the third Circuit be a 0:24:57.240 --> 0:25:00.560 good phase. Standard for filing will continue to be an 0:25:00.600 --> 0:25:03.199 impediment as it was the first two times. I mean, 0:25:03.760 --> 0:25:07.360 unless it's often reversed by the Supreme court, so it's 0:25:07.960 --> 0:25:10.159 really hard to know what the third filing may look like. 0:25:10.680 --> 0:25:13.639 What I mean, since the case was dismissed. Can you 0:25:14.880 --> 0:25:18.560 catch us up this? So, what's what's been happening with 0:25:18.720 --> 0:25:21.679 Jane Jay? What number of losses have been I mean, 0:25:21.720 --> 0:25:24.240 I know we've all seen a ton of losses filed 0:25:24.800 --> 0:25:26.200 after the dismissile. 0:25:27.080 --> 0:25:30.520 Sure, yep. So before bankruptcy there are about thirty nine 0:25:30.560 --> 0:25:33.680 thousand cases, and now the latest sits from the court 0:25:33.680 --> 0:25:36.520 in the case there are about fifty thousand, so about 0:25:36.560 --> 0:25:42.040 eleven thousand new cases have been filed. The court presiding 0:25:42.080 --> 0:25:45.080 over the federal cases has said it doesn't expect trials 0:25:45.119 --> 0:25:48.160 to happen until late twenty twenty four or early twenty 0:25:48.240 --> 0:25:51.680 twenty five, so there will still be some delay, but 0:25:51.920 --> 0:25:55.359 trials continue in the state court and a fewer schedules 0:25:55.359 --> 0:25:58.320 for next year. So do you think it's fair to 0:25:58.400 --> 0:26:00.800 say or safe to say that the whole if they 0:26:00.960 --> 0:26:02.680 try to file a third bankruptcy it will be in 0:26:02.720 --> 0:26:03.399 a different. 0:26:03.200 --> 0:26:05.359 Circuit, Yes, a different circle to help, but I think 0:26:05.560 --> 0:26:07.880 the other things that need to change too, you can, 0:26:08.280 --> 0:26:12.399 I mean, the case is currently on appeal. The bankruptcy 0:26:12.400 --> 0:26:16.159 is the LTL second Vankrups is currently on appeal, so 0:26:17.560 --> 0:26:19.960 it can, and it chose to appeal that it didn't 0:26:20.000 --> 0:26:22.959 have to. There were some rumors when the bankruptcy got 0:26:23.040 --> 0:26:27.760 filed that LTL actually wasn't going to appeal that dismissal 0:26:27.920 --> 0:26:31.560 because it wanted it could potentially file for the third time. 0:26:31.680 --> 0:26:37.119 And there weren't just rumors. The Torts Committee implied that 0:26:37.600 --> 0:26:40.800 during the dismissal hearing, the hearing to kind of decide 0:26:40.840 --> 0:26:43.560 what dismissal or it would look like. So the expectation 0:26:43.680 --> 0:26:47.199 for a third filing has always been there, but by 0:26:47.359 --> 0:26:52.840 choosing to appeal the second dismissal, and as that appeal 0:26:52.920 --> 0:26:55.080