Products Liability Law Daily J&J loses a second effort to centralize talc-related lawsuits
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Monday, July 22, 2019

J&J loses a second effort to centralize talc-related lawsuits

By Georgia D. Koutouzos, J.D.

The consumer products giant failed to establish an adequate basis for transferring thousands of lawsuits related to the use of asbestos-containing talc products to the Delaware bankruptcy court overseeing Imerys Talc America’s Chapter 11 proceedings.

The U.S. District Court for the District of Delaware has denied Johnson & Johnson’s motion to transfer to that state roughly 2,400 personal injury and wrongful death actions arising from cancers allegedly resulting from the use of J&J baby powder containing talc manufactured by the now-bankrupt Imerys Talc America, Inc. Echoing the rationale behind its May 2019 denial of the company’s emergency motion for ex parte relief in that regard, the court concluded that J&J failed to establish the existence of "related-to" subject-matter jurisdiction over the state-court talc claims and that, even if jurisdiction was proper, the court would abstain from hearing those cases (In re Imerys Talc America, Inc., July 19, 2019, Noreika, M.).

Johnson & Johnson and its talc supplier, Imerys Talc America, Inc., have been named in thousands of lawsuits all over the United States by individuals who allegedly developed mesothelioma and ovarian cancer after having been exposed to asbestos contained in the talc supplied by Imerys that had been a primary ingredient in products like J&J’s baby powder. Anticipating its ultimate liability, Imerys filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, after which all talc-related claims against Imerys were stayed pursuant to federal bankruptcy law.

Venue transfer motion. Thereafter, J&J filed a motion in the bankruptcy court to fix venue in that court with respect to the underlying personal-injury and wrongful-death claims against the companies in order to centralize the adjudication of claims impacting Imerys’ bankruptcy estate. The consumer products giant argued that because supply agreements between Imerys and J&J contain cross-contractual indemnifications triggered by the filing of the claims without regard to findings on underlying liability, those claims affect Imerys’ bankruptcy estate.

Ex parte relief denied. After the bankruptcy court entered a stipulated briefing schedule on the venue motion, J&J filed an emergency provisional transfer motion in the U.S. District Court for the District of Delaware, also requesting that the district court enter its order on the emergency motion immediately and on an ex parte basis. Agreeing with the committee of tort claimants and various other plaintiffs that J&J had failed to satisfy the burden for immediate relief, the district court held that the company’s desire to centralize the state-law litigation did not justify the entry of ex parte relief [see Products Liability Law Daily’s May 13, 2019 analysis]. Briefing on J&J’s motion was ordered to proceed under a specified schedule, after which the court issued its ruling on subject-matter jurisdiction underlying the sought-after venue transfer.

Subject-matter jurisdiction. J&J asserted that the Delaware federal court’s subject-matter jurisdiction was proper over the thousands of state-court talc claims under the "related to" prong of the federal statutory provision governing jurisdiction because: (1) the agreements between J&J and Imerys create indemnification obligations that "immediately impact" the latter’s bankruptcy estate; (2) the two companies have shared insurance, which impacts the bankruptcy estate; and (3) the two companies share an identity of interest.

Indemnification obligations. Potential indemnification is not sufficient to establish "related to" subject-matter jurisdiction, the court advised, finding that J&J failed to demonstrate that the underlying state-court talc lawsuits automatically triggered Imerys’ duty to indemnify the consumer products giant. Should any of the talc plaintiffs succeed against J&J in those cases, an indemnification from Imerys still would be contingent on the finding that J&J’s liabilities arose from a violation of law by Imerys and not from the acts or omissions of J&J itself. Given those contingencies, a right to indemnification was not clearly established or vested at the onset of the talc claims but, instead, is dependent on fact-finding in an ancillary proceeding, the court opined.

Shared insurance. Furthermore, because it is unclear whether Imerys will have a duty to indemnify J&J with respect to the state-court talc claims (or vice-versa), equally uncertain is whether the two companies’ shared insurance policies will have any effect on Imerys’ bankruptcy estate. Under relevant case precedent, evidence of "automatic liability" is required before a finding can be made that shared insurance helped establish "related-to" jurisdiction. No such evidence was provided in the case at bar, the court observed, refusing to base subject-matter jurisdiction over the 2,400 independent, state-law claims against J&J on insurance policies that the company submitted via a reply brief and for which little information is known.

Shared identity. In addition, the court found that J&J and Imerys do not share an identity of interest sufficient to establish "related to" jurisdiction. Despite the consumer products giant’s contention that a claim against it essentially is a claim against Imerys, J&J failed to establish the hallmarks on which courts traditionally have based an identity of interest. There was no corporate relatedness, no automatic indemnity, no automatic shared or mutual defense obligations, and no automatic liability upon the debtor for claims against a non-debtor, the court observed.

Discretionary abstention. Finally, even if subject-matter jurisdiction over the state-court talc claims was proper, the court abstained from transferring those claims to Delaware. The notion that an undertaking of roughly 2,400 cases under each of the 50 states’ personal-injury and wrongful-death laws would not be difficult is counterintuitive and without merit, the court said, adding that judges in the states that already are handling these cases are better suited to hear the claims before them.

Moreover, the court found it difficult to see how, if at all, the fixture of those cases in Delaware would provide for a more efficient handling of Imerys’ bankruptcy estate. If anything, the transfer of the state-court talc cases would grind the wheels of justice to a halt in Delaware, as cases at all stages of development would be added to an already-busy docket and would halt their orderly adjudication while the court familiarized itself with the unique facts of the talc plaintiffs’ claims and the tort laws of many states. Consequently, even if subject-matter jurisdiction existed, it is in the interest of both justice and comity with the state courts that the court exercise its discretion to abstain from merging the pending state-court talc cases for adjudication in Delaware. Accordingly, J&J’s venue-transfer motion was denied.

The case is No.19-mc-103 (MN).

Attorneys: Daniel A. Griffith (Whiteford, Taylor & Preston, L.L.C.) for talc victim plaintiffs. Steven K. Kortanek (Drinker Biddle & Reath LLP) for Johnson & Johnson.

Companies: Johnson & Johnson; Johnson & Johnson Consumer Inc.; Imerys Talc America, Inc.

MainStory: TopStory JurisdictionNews HouseholdProductsNews AsbestosNews DelawareNews

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