Article/Intelligence
BREAKING: Red River Talc Case to Stay in SDTX; Court Rejects Motions to Transfer Venue to New Jersey, Says ‘This Case Will Be Dismissed or Confirmed’
Ruling from the bench, Judge Christopher Lopez has denied dissenting talc claimants’ and the Office of the U.S. Trustee’s motions to transfer the venue of the Red River Talc case to New Jersey. Judge Lopez found that venue is proper in the Southern District of Texas, where the debtor filed, because it is “in the interests of justice.” He issued his bench decision after hearing oral arguments.
Judge Lopez explained that the movants – the UST and the Coalition of Counsel for Justice for Talc Claimants, comprising claimants that oppose Red River’s prepackaged plan – argue the Texas filing was an “abuse of the bankruptcy system.” The Red River case is parent Johnson & Johnson’s third “Texas two-step” bankruptcy aimed at resolving talc liabilities in three years, the judge noted. In the movants’ view, J&J chose Texas in an attempt to evade unfavorable rulings in the U.S. Court of Appeals for the Third Circuit, where the two earlier cases of LTL Management (Red River’s predecessor) were dismissed. This constitutes improper forum shopping, the movants asserted.
In contrast, Judge Lopez continued, the debtor and the ad hoc committee of supporting counsel insisted the case should remain in Texas. There are a “not insignificant” number of claimants who support the case being in the Southern District of Texas, he said, and Red River filed in this venue “because creditors voted for it.” Judge Lopez said he took seriously the view that the plan could end litigation and “put real money in the hands of real people.” The judge also acknowledged that the movants challenge the debtor’s representation that 83% of claimants voted for the plan, but he said this issue should be addressed later in the case.
Unlike LTL, Red River Talc is a Texas entity, the judge emphasized, and more of the debtor’s claimants reside in Texas than in New Jersey. “The debtor before me isn’t LTL,” Judge Lopez said, adding that Red River “has a different corporate and capital structure.” The movants had argued that J&J created Red River through a corporate restructuring of LTL specifically to facilitate the Texas filing.
Although the movants highlighted that a New Jersey federal court oversees the talc multidistrict litigation, Judge Lopez remarked, “New Jersey may be home to more talc-related litigation, but based upon the record before me, there are a lot of creditors who reside in Texas.”
Judge Lopez said the most important factor in Fifth Circuit case law when considering venue transfer is the economic administration of the estate. But the case can be effectively run in Texas, he added, noting that hearings in the Southern District of Texas “are presumptively hybrid.”
After describing the parties’ positions, Judge Lopez said, “I think both sides have the right to argue these issues. But I don’t think that a motion to transfer is the right vehicle.” The judge pointed out that a motion to dismiss the case is “already on file,” and added, “I’m confident that I can follow the process and let the answer fall where it may.”
“This case is going to be dismissed or it’s going to be confirmed,” Judge Lopez promised, saying he won’t let the case linger “needlessly” in chapter 11. He said, “let’s take up the hard questions,” and “I want you to take up the issues that are truly before me. Let’s schedule these issues.”
The judge indicated that he will schedule a hearing early next week on Red River’s request for a temporary restraining order halting talc litigation against parent Johnson & Johnson and other protected parties.