Speaker 1: Well, Welcome to the Votes and Vergs podcasts hosted by
Speaker 1: Bloomberg Intelligence, the investment research arm of Bloomberg LP. In
Speaker 1: this podcast series, we talk about the intersection of business
Speaker 1: policy and law. My name is Holly Frome. I'm an
Speaker 1: analyst with Bloomberg Intelligence covering consumer industrials and healthcare litigation.
Speaker 1: Today's podcast will focus on mass sport litigation and the
Speaker 1: company's attempts to use bankruptcy proceedings to resolve those cases.
Speaker 1: I'm delighted to be joined today by Negie, the Beluku
Speaker 1: bankruptcy attorney and litigation analyst with Bloomberg Intelligence. Thanks Nigysa
Speaker 1: for joining me today. I wanted to talk about J
Speaker 1: and J. Johnson and Johnson, a company facing tens of
Speaker 1: thousands of lawsuits against it and its consumer subsidiary over
Speaker 1: allegations it's calcolm powder causes, ovariant answer and mess Ocailyoma
Speaker 1: cases were filed in cederal and state court. Federal cases
Speaker 1: were consolidated in multi district litigation in New Jersey, and
Speaker 1: the verdict out of state court have generally been mixed,
Speaker 1: with one notable verdict outa Missouri for two point one
Speaker 1: billion dollars. Then in twenty twenty one, Johnson and Johnson
Speaker 1: filed from bankruptcy for a subsidiary using something called the
Speaker 1: Texas two step. I was wondering, can you explain what
Speaker 1: the Texas two step is and how Johnson and Johnson
Speaker 1: utilized that process? Sure?
Speaker 2: So, what do we call what we're calling the Texas
Speaker 2: two step. It's also it's a divisional merger. It's done
Speaker 2: under the Texas Business Organization Code and broadly speaking, for
Speaker 2: Jane's purposes and for any solvent company using it. What
Speaker 2: it does it makes bankruptcy an option available to companies
Speaker 2: that are not actually in distress. So in October of
Speaker 2: twenty twenty one, Jane j took a serious steps to
Speaker 2: allocate it's talk related liabilities that were with all JJCI
Speaker 2: to new subsidiary. It's called that the LTL management. While
Speaker 2: almost all of the assets were left behind in the
Speaker 2: new jjcis in this new sub and finally not the
Speaker 2: simple but LTL was oftim really put into bankruptcy. I
Speaker 2: do want to know that the Textas two step is
Speaker 2: controversial obviously in the bankruptcy context, but division merger statues
Speaker 2: are perfectly good line to access Delaware two for that
Speaker 2: matter with some slight differences. At its core, what the
Speaker 2: statue does it breaks up the company, so it accomplishes
Speaker 2: the opposite of a merger. It's a corporate structuring statue
Speaker 2: that doesn't deem sort of the separation to be an
Speaker 2: assignment or a transfer. That's typically important because companies use
Speaker 2: it to avoid certain restrictions and contracts for example. But well,
Speaker 2: I Google be talking to about Jane j and U
Speaker 2: and beyond sort of in its two bankruptcy attempts, but
Speaker 2: that were file based on the statue. But the statue itself,
Speaker 2: that's still perfectly good law. It's actually it actually hasn't
Speaker 2: been challenged in any of the bankruptcies in the bankruptcy
Speaker 2: context when we're using Texas to step. There's a lot
Speaker 2: of layers to it. In Jane Jay's bankruptcy, as are
Speaker 2: many of these tour bankruptcies. Are is the company was
Speaker 2: accompanied by funding agreement, which is truly becomes a cornerstone
Speaker 2: of this chapter elevens where the parent purports to cover
Speaker 2: the tort obligations. Ironically, this spunding agreement also turned out
Speaker 2: to be its downfall. Ultimately the third circuit and I
Speaker 2: guess to answer the question why bankruptcy, why all these
Speaker 2: efforts to be in it? For those that support it,
Speaker 2: the claim is that all this is done in the
Speaker 2: name of efficiency. Basically, we know in bankruptcy majority binds
Speaker 2: hold out also bind's future claimants, so you can set
Speaker 2: up future claims. Bankruptcy also could ensure a level of
Speaker 2: playing field for all present and future victims. And while
Speaker 2: it may not be great for those few claimants who
Speaker 2: have secret judgments or those that may end up going
Speaker 2: to trial, those supportive of it will say that looking
Speaker 2: at the big picture, bankruptcy here could provide a way
Speaker 2: to pay all claimants and do so quicker that than
Speaker 2: the MDL system.
Speaker 1: On interesting, So, LTL was the company to which jj
Speaker 1: C Johnson Johnson Consumer business business is talk light though
Speaker 1: it was allocated, and I understand the bankruptcy court in
Speaker 1: which LTL filed was North Carolina. That court transferred the Kingston,
Speaker 1: New Jersey. Can you tell us why LTL filed in
Speaker 1: North Carolina in the first place?
Speaker 2: So yeah, So LTL was incorporated in Texas because this
Speaker 2: was a Texas statue it was created under, and I
Speaker 2: believe later that day switched to the North Carolina company
Speaker 2: for exactly the purpose of filing for bankruptcy in North
Speaker 2: Carolina until then, So this was some time ago. Obviously,
Speaker 2: North Carolina was the only court that had dealt with
Speaker 2: divisional mergers under this Texas statue, and the reasoning is
Speaker 2: obviously more complex than that. Also, generally speaking, it is
Speaker 2: harder to dismiss a case in the Fourth Circuit as
Speaker 2: a bad faith filing. It's also easier to extend the
Speaker 2: automatic state to non debt are in the Fourth Circuit
Speaker 2: and sometimes passed from what we know since JJ wasn't wrong.
Speaker 2: The Fourth Circuit has yet to address some of these
Speaker 2: issues in the Texas two stepcases, and these cases are
Speaker 2: there now are still moving through the appeal process. But
Speaker 2: the North Carolina bankerancy courts and the higher course, including
Speaker 2: the Fourth Circuit, have generally been much more accepting of
Speaker 2: the strategy that the Third Circuit has been. For example,
Speaker 2: where JANJ ended up going to New Jersey.
Speaker 1: Interesting, you mentioned an automatic stay. Can you explain what
Speaker 1: the automatic state is in bankruptcy?
Speaker 2: Yeah, So the automatic stay is one of the fundamental
Speaker 2: debtor protections. So the bankruptcy provides immediately upon filing, the
Speaker 2: automatic state goes into effect, and it's what it is
Speaker 2: is basically an injunction that prohibits all actions against the debtor.
Speaker 2: There's some exceptions, like governmental actions, but it's supposed to
Speaker 2: provide a briefing spelled for the debtor. So it stops lawsuits,
Speaker 2: it stops collection actions for closures. It may look like
Speaker 2: or feel like a punishment for certain creditors, but it's
Speaker 2: not meant to be what it does. It puts all
Speaker 2: creditors on the same footing. Basically, it creates this level
Speaker 2: of painful as I said, and the expectation is that
Speaker 2: will automatically ultimately facilitate or structuring.
Speaker 1: Got it? So J ANDJ was able to have that
Speaker 1: stay applied to it even though it didn't file for
Speaker 1: bankruptcy for itself. It's subsidiary. Can you explain why JJ
Speaker 1: was able to take advantage of that day even though
Speaker 1: it was not the entity that was filing for bankruptcy?
Speaker 2: Right? So that's when the automatics day becomes stricky in
Speaker 2: an issue and a problem. Sometimes it's when the debtor
Speaker 2: seeks to extend it to third parties, as was the
Speaker 2: case in LTL, and those thirtin parties could be apparent
Speaker 2: like in the case jing J, it could be other
Speaker 2: third parties also not unrelated. So while the state applied
Speaker 2: automatically to LTL as the debtors, no lawsuits against LTL
Speaker 2: could proceed. It's no secret that the goal of the
Speaker 2: entire bankruptcy was to have LTL, as the debtor, extend
Speaker 2: the state to the parent jan J. When assess in
Speaker 2: wanted to extend the state to third parties, the question
Speaker 2: the bankruptcy court primarily asked is whether suits against this
Speaker 2: third party are effectively suits against the debtors, because the
Speaker 2: goal remains to protect the debtor's state and promote restructuring
Speaker 2: of whichever entity that filed. After the case were transferred
Speaker 2: to New Jersey, gan J was able to produce a
Speaker 2: nineteen seventy nine agreement that showed that old JJCI had
Speaker 2: assumed all of the vast majority of how related liabilities.
Speaker 2: So what they were able to accomplish this was convinced
Speaker 2: the court that to extend the state to JANEJ was
Speaker 2: because they were able to show this equivalency of liability
Speaker 2: between jan J and LTL, whereby a suit against Jane
Speaker 2: J would have been one against LTL. So that's was
Speaker 2: the reasoning behind extending the state to JEJ got it.
Speaker 1: So the tal claimants, I'm sure weren't happy about that.
Speaker 1: They eventually moved to dismiss the case, arguing that the
Speaker 1: filing was made in bad faith, and in a ruling
Speaker 1: render in February twenty twenty two, the lower court declined
Speaker 1: to dismiss the case. Can you explain why the lower
Speaker 1: court didn't dismiss the case? Sure?
Speaker 2: So this was Judge Kapl in Jersey Bankruptcy Court. He
Speaker 2: was a pretty lengthy, dense, complex opinion that at his core,
Speaker 2: I think it recognized the short folds a few things,
Speaker 2: So the shortfalls of the NDL system, first of all,
Speaker 2: the benefits of the bankruptcy system for an efficient resolution
Speaker 2: of thought liabilities. And I think underlying all that there
Speaker 2: was perhaps this notion of the means justifying the end.
Speaker 2: There were clear reminders that a bankruptcy would be disastrous
Speaker 2: for Jane J. It was forced to file based on
Speaker 2: the stack liabilities that we have this company that is
Speaker 2: basically more than offering to pay these claims in full,
Speaker 2: and what could claimants possibly ask for more? This is
Speaker 2: really as good as it's probably going to get outside
Speaker 2: of the policy reasons. The ruling indicated that LTL was
Speaker 2: in sufficient financial distress, and that's what you need to
Speaker 2: show that you have a good faith filing. That was
Speaker 2: ultimately reversed. But that's kind of the main reasoning behind
Speaker 2: the ruling.
Speaker 1: And you mentioned that the ruling was eventually reversed by
Speaker 1: the appellate court. That was in January, at least January
Speaker 1: twenty three. Yeah, the third Circuit reverse the lower court
Speaker 1: and dismissed the bankruptcy case. What was the basis for
Speaker 1: the third Circuit's decision.
Speaker 2: So they all went back to financial distress. So the
Speaker 2: Third Circuit found that ALTL was not in financial distress.
Speaker 2: This was interesting. I mean, the good faith standard for
Speaker 2: filing a chapter of bankruptcy hasn't hadn't until then, and
Speaker 2: still in many circuits hasn't been clearly defined. What we
Speaker 2: know we knew is that you don't need to be
Speaker 2: insolvent to file for bankruptcy, but there hadn't been a
Speaker 2: lot set beyond that as to what you actually need.
Speaker 2: If their circuits said a lot more actually clarify this
Speaker 2: in many ways, it demanded what it called imminent and
Speaker 2: apparent financial distress, that being a necessary component of a
Speaker 2: good faith Chapter eleven filing, and that's where the funding
Speaker 2: agreement comes into play. So by this funding agreement, upon filing,
Speaker 2: ALTL had access to over sixty one billion dollars for
Speaker 2: the payment of talk liabilities by the funding agreements, So
Speaker 2: I think there was a floor of sixty one point
Speaker 2: five billion, and just plainly speaking, it just turned out
Speaker 2: it was ultimately tourist for bankruptcy. People. Many will point
Speaker 2: out that there's certainly an irony here. You have those
Speaker 2: proponents of textis to step will point out that what
Speaker 2: the Third Circuit basically did is prohibit a bankruptcy or
Speaker 2: a bank aftentity that clearly had the ability to pay
Speaker 2: creditors in fall from actually proceeding to pay creditors in fall.
Speaker 2: And important to know that what the opinion didn't do
Speaker 2: is that it didn't address the application of the automatics
Speaker 2: stay to Jane j which was kind of a different finding.
Speaker 2: So it really it fell on this good faith standard.
Speaker 1: So in April of this year, Johnson and Johnson filed
Speaker 1: for bankruptcy for subsidiary. Again, can you explain how this
Speaker 1: bankruptcy filing differed from the first one.
Speaker 2: So I think LTL filed second bankruptcy about three hours
Speaker 2: after the first case was officially dismissed, and in many ways,
Speaker 2: obviously not much had changed, right at least from the
Speaker 2: perspective of what the financial conditions of the company were.
Speaker 2: Both Jane and lt HELL had been avoiding trials for
Speaker 2: a year and a half and suits for a year
Speaker 2: and a half. What did change, though, and this was key,
Speaker 2: was the support around a global settlement LTL filed to
Speaker 2: support with support of law firms that represented about sixty
Speaker 2: thousand claimants and a funding agreement that stood at eight
Speaker 2: point nine billions set of the original sixty one point
Speaker 2: five billion, and that funding agreement purported to basically cover
Speaker 2: global settlement that would cover present and future claims as
Speaker 2: well as third party pay your type, suppliers, governmental and
Speaker 2: so forth. LTL did ask for a stay immediate to
Speaker 2: extend the state to JJ again immediately after its file,
Speaker 2: and what was I was able to get this time
Speaker 2: around was modified stay I guess they called it where
Speaker 2: discovery related matters were able to proceed, but the court
Speaker 2: did stay the trials. Also, while new suit I believes
Speaker 2: could be filed, plaintiffs could elect to defer the filing
Speaker 2: of new lawsuits. Actually that saved huge expense all obviously trials.
Speaker 2: Not being able to proceed the trials saves a lot
Speaker 2: of expenses, but not needing being able to defer filing
Speaker 2: of new lawsuits was a huge expense siver also because many,
Speaker 2: if not all, of the sixty thousand new claimants that
Speaker 2: were expected to support the plan actually had a file
Speaker 2: lawsits and now they didn't have to. I believe there
Speaker 2: was one trial eventually allowed down the line, but that
Speaker 2: was decided on a one up basis. Generally speaking, there
Speaker 2: was a lot of relief afforded the second time round,
Speaker 2: though not admittedly not as much as the first bankruptcy
Speaker 2: And what was.
Speaker 1: The outcome of the second Chapter eleventh filing.
Speaker 2: It was dismissed by the bankruptcy court, but not but
Speaker 2: it did spend a few months in makruptcy, so it
Speaker 2: was an immediate Why was it dismissed it twas so,
Speaker 2: I don't know. I don't think I mentioned that, But
Speaker 2: it was in front of the same makeruptcy court where
Speaker 2: the first filing happened, was in front of Judge Kaplan
Speaker 2: in New Jersey, so same judge it and it was
Speaker 2: dismissed very much on the same grounds laid out by
Speaker 2: the Third Circuit just months prior, that there was no
Speaker 2: on a good faith basis that there was no imminent
Speaker 2: and apparent financial distress to this filing. I I think
Speaker 2: it's worth mentioning that Judge Kaplan didn't hide his displeasure
Speaker 2: maybe having to reach this ruling, and it did in
Speaker 2: many ways question whether this standard that the Tir Circuit
Speaker 2: had articulated of imminent and apparent financial distress made sense.
Speaker 2: I'd say that the stake isn't uncommon in the bankruptcy
Speaker 2: circles today. There is this fear that this standard of
Speaker 2: imminent and apparent financial distress may look a lot like
Speaker 2: an insolvency requirement, which we know that there shouldn't be.
Speaker 2: We don't expect that to be. So this concern that
Speaker 2: this wag and see approach to the bankruptcy filing will
Speaker 2: keep out of bankruptcy companies that would really benefit from it. Obviously,
Speaker 2: this change is not a good case that illustrates that
Speaker 2: because it's clearly not near insolvency, but there is concern
Speaker 2: as to how the standard may affect other companies.
Speaker 1: Bankruptcy courts, multiple dismissals. Do you think JANJ received any
Speaker 1: benefit bypiling for bankruptcy and so what?
Speaker 2: So there's a hard question to answer without the benefit
Speaker 2: of perspective, I guess, but I mean a general speaking,
Speaker 2: I say yes. I mean since October of twenty twenty one,
Speaker 2: now it's close to two years, it's avoided trials. It
Speaker 2: avoided suits for a very long time. The bankruptcy court,
Speaker 2: as I mentioned before, applied this modified state during the
Speaker 2: second bankruptcy, and there was a lot of breathing room
Speaker 2: given to the company to change j to allow it
Speaker 2: to focus on settlement or to take some steps towards it.
Speaker 2: I mean bankruptcy is expensive, generally speaking, but so our trials. Ultimately,
Speaker 2: I think it's not an n reasonable price to pay
Speaker 2: for a chance of concluding these suits. And these are
Speaker 2: both present and futurized it will conclude them for good.
Speaker 2: Were successful. Also, I mean this was meant, I think,
Speaker 2: to be a long term appeal process. This was a
Speaker 2: daring strategy when it started. I think the failures along
Speaker 2: the way couldn't have been a major surprise to the company,
Speaker 2: especially the second filing. So and maybe it did create
Speaker 2: this creating slementum from a global settlement. I mean there's
Speaker 2: three M on the other side too, right, do you
Speaker 2: think bankruptcy helped three M reach its settlement? Like, what
Speaker 2: does that? What does that look like for three AM?
Speaker 2: It did. It's not a Texas two step, but it
Speaker 2: did follow a very similar approach to resolving it's towards liabilities.
Speaker 1: Yeah, that's a good question. So, just by way of backround,
Speaker 1: three AM was another company that was facing mass sport
Speaker 1: litigation veterans Military veterans alleged earplugs that they used that
Speaker 1: were supplied to the military were defective and caused hearing loss.
Speaker 1: There were three hundred thousand cases at one point. The
Speaker 1: airplugs were originally manufactured by Arrow, which was a company
Speaker 1: that THREEM acquired. So in twenty twenty two, three M
Speaker 1: tried to put its subsidiary Arrow in bankruptcy during this
Speaker 1: mass wort litigation and get a stay of that litigation
Speaker 1: as to both itself and its subsidiary. Three M ultimately
Speaker 1: didn't get to stay and Arrows bankruptcy finaling was eventually dismissed.
Speaker 1: But in two each of this year, it was announced
Speaker 1: that three M agreed to pay six billion dollars to
Speaker 1: resolve over two hundred and forty thousand claims. Under the
Speaker 1: settlement agreement at three, a M has a walk away
Speaker 1: right if less than ninety eight percent of eligible PLANEIFS degree.
Speaker 1: I don't think bankruptcy helped them settle the case, other
Speaker 1: than to know that it wasn't an option. Unlike Jane J.
Speaker 1: Threem didn't get us today, which if granted, could have
Speaker 1: lowered settlement value due to delay and potential payoffs. But
Speaker 1: I think really simulated talks were their mixed trial outcome,
Speaker 1: their mistrial record, as well as the fact that it
Speaker 1: seemed pretty clear that they were going to lose the
Speaker 1: Eleventh Circuit appeal of the first bell Weather verdict, and
Speaker 1: just by way of background on that, a potentially this
Speaker 1: positive issue in all these like hundreds of thousands of
Speaker 1: cases was whether Threem had what's called a government contractor immunity,
Speaker 1: which is the defense that exists if a contractor supplies
Speaker 1: goods to the military to the military specification and if
Speaker 1: the contractor has worn the government of the risks. The
Speaker 1: lower court found Threem didn't have government contract or immunity,
Speaker 1: and that issue was appealed to the Eleventh Circuit. The
Speaker 1: Eleventh Circuit heard oral argument and it seemed somewhat clear
Speaker 1: during the hearing that the panel was a client inclined
Speaker 1: to affirm the lower court. So three M entered into
Speaker 1: this settlement. There was a separate settlement agreement for cases
Speaker 1: that went to verdict and WAD cases which were closer
Speaker 1: to trial because they were identified for pre trial discovery
Speaker 1: work up prior to the settlement date. And there will
Speaker 1: be a fairness hearing in December because part of the
Speaker 1: settlement is being paid in stock, so the court will
Speaker 1: consider whether the proposed transfer stock by three AM as
Speaker 1: partial consideration in the settlement is fair and that's happening
Speaker 1: on December eleventh. So I think those catalysts were really
Speaker 1: what stimulated the settlement as opposed to a bankruptcy filing.
Speaker 2: Do you think it's easier for Was it easier for
Speaker 2: three a M to reach a settlement outside of bankruptcy
Speaker 2: compared to JANJ for example?
Speaker 1: I think so. And the reason why I think it
Speaker 1: was easier was because with three AM, the injury would
Speaker 1: hear the alleged injury manifested itself not too long after
Speaker 1: usage of the earplugs, whereas cancer, the alleged injury from
Speaker 1: tal competitor could have a latency of twenty to forty years,
Speaker 1: and ear plugs were sold between nineteen ninety nine and
Speaker 1: twenty fifteen, or as stalk was sold over decades and
Speaker 1: Johnson and Johnson pulled the product in twenty twenty. The
Speaker 1: statue and the statue limitations generally runs from the date
Speaker 1: of injuries, so theoretically a person that used the product
Speaker 1: in twenty twenty could perhaps get cancer in twenty forty
Speaker 1: and say that it was caused by TALC and file
Speaker 1: their lawsuit in twenty forty. So the universal cases for
Speaker 1: Johnson and Johnson is still unknown. Whereas I don't expect
Speaker 1: there to be a significant number of new year Plug
Speaker 1: cases filed because sales ceased from twenty fifteen and the
Speaker 1: alleged injury manifests itself relatively quickly, so I think there
Speaker 1: was more visibility as to the number of claimants with
Speaker 1: three a M, which potentially could have made settlement a
Speaker 1: little easier. So we talked about why Johnson Johnson may
Speaker 1: have received the benefit. There's murmuring from filing for bankruptcy.
Speaker 1: There's murmurings that Jane j will attempt to file a
Speaker 1: third bankruptcy proceeding given the prior failures, do you think
Speaker 1: this case would stand a better chance of success?
Speaker 2: True, Well, the second dismissal is now on appeal is
Speaker 2: directly getting appealed to the Third Circuit. Again, LTL is
Speaker 2: not prohibited for filing for bankruptcy. Actually, the TAP Committee
Speaker 2: requested the Bankercy Court to prohibit a third filing within
Speaker 2: a six month period. They were deny that request, and
Speaker 2: also the Bankercy Court continue to encourage parties to negotiate
Speaker 2: as it was dismissing the case. So there's that. I mean,
Speaker 2: I don't know what a third filing mad look like.
Speaker 2: Something does need to change, obviously, and whether that's the
Speaker 2: entity that files, or the conditions of the LTL or
Speaker 2: maybe a much wider settlement. I mean, they said they
Speaker 2: had about sixty percent of claimants on board last time,
Speaker 2: with very strong opposition by the Tap Committee. Obviously, I mean,
Speaker 2: a different circuit help in the third Circuit be a
Speaker 2: good phase. Standard for filing will continue to be an
Speaker 2: impediment as it was the first two times. I mean,
Speaker 2: unless it's often reversed by the Supreme court, so it's
Speaker 2: really hard to know what the third filing may look like.
Speaker 2: What I mean, since the case was dismissed. Can you
Speaker 2: catch us up this? So, what's what's been happening with
Speaker 2: Jane Jay? What number of losses have been I mean,
Speaker 2: I know we've all seen a ton of losses filed
Speaker 2: after the dismissile.
Speaker 1: Sure, yep. So before bankruptcy there are about thirty nine
Speaker 1: thousand cases, and now the latest sits from the court
Speaker 1: in the case there are about fifty thousand, so about
Speaker 1: eleven thousand new cases have been filed. The court presiding
Speaker 1: over the federal cases has said it doesn't expect trials
Speaker 1: to happen until late twenty twenty four or early twenty
Speaker 1: twenty five, so there will still be some delay, but
Speaker 1: trials continue in the state court and a fewer schedules
Speaker 1: for next year. So do you think it's fair to
Speaker 1: say or safe to say that the whole if they
Speaker 1: try to file a third bankruptcy it will be in
Speaker 1: a different.
Speaker 2: Circuit, Yes, a different circle to help, but I think
Speaker 2: the other things that need to change too, you can,
Speaker 2: I mean, the case is currently on appeal. The bankruptcy
Speaker 2: is the LTL second Vankrups is currently on appeal, so
Speaker 2: it can, and it chose to appeal that it didn't
Speaker 2: have to. There were some rumors when the bankruptcy got
Speaker 2: filed that LTL actually wasn't going to appeal that dismissal
Speaker 2: because it wanted it could potentially file for the third time.
Speaker 2: And there weren't just rumors. The Torts Committee implied that
Speaker 2: during the dismissal hearing, the hearing to kind of decide
Speaker 2: what dismissal or it would look like. So the expectation
Speaker 2: for a third filing has always been there, but by
Speaker 2: choosing to appeal the second dismissal, and as that appeal
Speaker 2: is still pending and it would likely to continue to
Speaker 2: be pending well into twenty twenty four, some there needs
Speaker 2: to be some change in circumstance that probably goes beyond
Speaker 2: switching circuits.
Speaker 1: Right right, That makes sense. So I understand another company,
Speaker 1: Georgia Pacific, they're affiliate stiles from bankruptcy protection relation to
Speaker 1: as bestess claims in a North Carolina bankruptcy court, that
Speaker 1: case wasn't dismissed. Can you tell us why it wasn't dismissed?
Speaker 2: So this is the best Wall in the Four Circuit
Speaker 2: Best Walls subsidiary of Georgia Pacific, as you mentioned, facing
Speaker 2: as vestis liabilities also in chapter eleven based on Texas
Speaker 2: two Step is one of those cases that filed before
Speaker 2: ltl's first filing. Actually, the Four Circuit did uphold the
Speaker 2: bankruptcy court decision and allowed to extend the automatic state
Speaker 2: to the non debt or per parent, and it does
Speaker 2: so this ruling, and this is what it gets confusing
Speaker 2: between the good faith inquiry and automatic stay inquiry. The
Speaker 2: Fourth Circuit ruling doesn't actually conflict with the Third Circuit
Speaker 2: to JJ decision, and it doesn't impact the appeal in
Speaker 2: any way because the JJ decision was based on a
Speaker 2: good faith standard. The good faith question actually may make
Speaker 2: its way to the Fourth Circuit as well, but it's
Speaker 2: not what we have here yet. What the Fourth Circuit
Speaker 2: ruling could have done and probably would have done, was
Speaker 2: likely conflict with the Seventh Circuit ruling in three M
Speaker 2: that you were just mentioning, because that core didn't as
Speaker 2: you mentioned, the losses against the parent three M were impaused,
Speaker 2: so oral argument had already taken place in the Seventh
Speaker 2: Circuit seven Circuit because aerofile than Indiana, and I do
Speaker 2: think that the Service circuits have likely prohibited the extension
Speaker 2: of the state to three M as well, just like
Speaker 2: the Indiana Bankruptcy Court did. The decision was state pending
Speaker 2: approval of three M settlements, so we would won't get
Speaker 2: an answer as to whether there would have been a
Speaker 2: clear circus split between the Fourth and the Seventh Circuit,
Speaker 2: but there was a very good chance of that. The
Speaker 2: automatic state question and best Wall Georgia Pacific may get
Speaker 2: appealed in November to the U. S. Supreme Court. All
Speaker 2: this case, I think I said before they they likely
Speaker 2: all expect a long appeal process. I don't think dismissal
Speaker 2: of the second bankrupciver surprise, and I don't think it
Speaker 2: would be a surprised either one A third Circuit most
Speaker 2: likely uphold the second dismissal again, and I think that's
Speaker 2: in a third filing or something to that effect. Like
Speaker 2: LTL would probably also look for Supreme Court review of
Speaker 2: this strategy after the next Third Circuit decision.
Speaker 1: It would be interesting to see if the Supreme Court
Speaker 1: takes that one up. So, if ruly is sustained, well,
Speaker 1: how do you think that impacts changes chances a securing
Speaker 1: success and a potential third bankruptcy one.
Speaker 2: So I don't think it, Uh, Well, the current ruling
Speaker 2: from the Fourth Circuit that addresses only the automatic stay
Speaker 2: extension to Georgia Pacific, it's not relevant to J and
Speaker 2: J because Jay's both dismissals have been primarily based on
Speaker 2: the good faith standard. So I mean, obviously it will
Speaker 2: depend on which circuit it files and whatnot. But the
Speaker 2: good faith ruling that will probably come out of the
Speaker 2: Fourth Circuit that may be more relevant to change because
Speaker 2: it may actually conflict with a third circuit, and that
Speaker 2: may also position both of those cases perhaps for better
Speaker 2: chances for Supreme Court review. But it's sort of like
Speaker 2: amaze like they I mean, both the automatic stay and
Speaker 2: the good faith standards both accomplish the same thing, obviously,
Speaker 2: except that the automatic stay, even if it's not applied
Speaker 2: to the parent, like was a case on three AM,
Speaker 2: it doesn't actually dismiss the bankruptcy as opposed to a
Speaker 2: good faith bad faith finding, which is an automatic dismissal
Speaker 2: of the bankruptcy. But they do comflisen the same thing,
Speaker 2: as you said, if the state doesn't get extended to
Speaker 2: the parent then the major reason why for filing this
Speaker 2: bankruptcy sort of falls apart and.
Speaker 1: Fails interesting, so it'll be really interesting to see what happens.
Speaker 1: Thank you, Nigisa, Thank you so much for joining me
Speaker 1: today