Case: 22-2003 Document: 178 Page: 1 Date Filed: 03/31/2023
`
`
`
`
`
`
`
`
`
`
`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`
`
`
`Nos. 22-2003, 22-2004, 22-2005, 22-2006, 22-2007,
`22-2008, 22-2009, 22-2010, 22-2011
`
`
`
`
`
`
`
`In Re: LTL MANAGEMENT LLC,
`Debtor
`
`
`OFFICIAL COMMITTEE OF TALC CLAIMANTS,
`Appellant
`
` v.
`
` THOSE PARTIES LISTED ON APPENDIX A TO COMPLAINT AND JOHN AND JANE
`DOES 1-1000
`
`(District Court Civil No.: 21-bk-30589; 21-ap-03032)
`
`Present: RESTREPO, FUENTES, and AMBRO* Circuit Judges,
`
`ORDER
`
`
`
`The Clerk is directed to file the amended precedential opinion contemporaneously
`
`with this order. The changes to the opinion are shown in blue and red text on the pages
`
`attached as Exhibit A to this order. As the opinion has not been revised in any material
`
`way, no party may file a petition for rehearing.
`
`
`
`
`
`
`
`
`
`* Judge Ambro assumed senior status on February 6, 2023.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`UNITED STATES COURT OF APPEALS
`FOR THE THIRD CIRCUIT
`
`
`
`Nos. 22-2003, 22-2004, 22-2005, 22-2006, 22-2007,
`22-2008, 22-2009, 22-2010, 22-2011
`
`
`
`
`
`
`
`In Re: LTL MANAGEMENT LLC,
`Debtor
`
`
`OFFICIAL COMMITTEE OF TALC CLAIMANTS,
`Appellant
`
` v.
`
` THOSE PARTIES LISTED ON APPENDIX A TO COMPLAINT AND JOHN AND JANE
`DOES 1-1000
`
`(District Court Civil No.: 21-bk-30589; 21-ap-03032)
`
`Present: RESTREPO, FUENTES, and AMBRO* Circuit Judges,
`
`ORDER
`
`
`
`The Clerk is directed to file the amended precedential opinion contemporaneously
`
`with this order. The changes to the opinion are shown in blue and red text on the pages
`
`attached as Exhibit A to this order. As the opinion has not been revised in any material
`
`way, no party may file a petition for rehearing.
`
`
`
`
`
`
`
`
`
`* Judge Ambro assumed senior status on February 6, 2023.
`
`
`
`
`Case: 22-2003 Document: 178 Page: 2 Date Filed: 03/31/2023
`
`
`
` BY THE COURT,
`
`
`
` s/ THOMAS L. AMBRO
`
`
`
`Circuit Judge
`
`Dated: March 31, 2023
`JK/cc: All Counsel of Record
`
`
`
`
`
`
`2
`
`
`
`Case: 22-2003 Document: 178 Page: 3 Date Filed: 03/31/2023
`
`Exhibit A
`
`Revised Text
`
`
`
`
`
`
`
`
`
`Case: 22-2003 Document: 178 Page: 4 Date Filed: 03/31/2023
`
`underlying basic and inferred facts require clear-error review,
`the culminating determination of whether those facts support a
`conclusion of good faith gets plenary review as “essentially[]
`a conclusion of law.” Id.; see also U.S. Bank Nat’l Ass’n ex.
`rel. CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC,
`138 S. Ct. 960, 966-68 (2018). A conclusion of financial
`distress, like the broader good-faith inquiry of which it is a part,
`likewise is subject to mixed review. Whether financial distress
`exists depends on the underlying basic facts, such as the
`debtor’s ability to pay its current debts, and inferred facts, such
`as projections of how much pending and future liabilities (like
`litigation) could cost it in the future. But the ultimate
`determination conclusion, like with good faith, is essentially a
`conclusion of law that gets a fresh look. See id.
`
`
`B. Good Faith
`
`Chapter 11 bankruptcy petitions are “subject to
`dismissal under 11 U.S.C. § 1112(b) unless filed in good
`faith.” BEPCO, 589 F.3d at 618 (citing NMSBPCSLDHB, L.P.
`v. Integrated Telecom Express, Inc. (In re Integrated Telecom
`Express, Inc.), 384 F.3d 108, 118 (3d Cir. 2004)). Section
`1112(b) provides for dismissal for “cause.” A lack of good
`faith constitutes “cause,” though it does not fall into one of the
`examples of cause specifically listed in the statute. See In re
`SGL Carbon Corp., 200 F.3d 154, 159-62 (3d Cir. 1999).
`Because the Code’s text neither sets nor bars explicitly a good-
`faith requirement, we have grounded it in the “equitable nature
`of bankruptcy” and the “purposes underlying Chapter 11.” Id.
`at 161-62 (“A debtor who attempts to garner shelter under the
`Bankruptcy Code . . . must act in conformity with the Code’s
`underlying principles.”).
`
`
`
`
`35
`
`
`
`Case: 22-2003 Document: 178 Page: 5 Date Filed: 03/31/2023
`
`dismissal, of claims by assuming most, if not all, would go to
`and succeed at trial. In doing so, these projections contradict
`the record. And while the Bankruptcy Court questioned the
`continuing relevance of the past track record after Ingham and
`the breakdown of the Imerys settlement talks, this assumes too
`much too early. Nothing in the record suggests Ingham—one
`of 49 pre-bankruptcy trials and described even by J&J as
`“unique” and “not representative,” App. 2692-93—was the
`new norm. Nor is there anything that shows all hope of a
`meaningful global or near-global settlement was lost after the
`initial Imerys offer was rebuffed. The Imerys bankruptcy
`remained a platform to negotiate settlement. And the
`progression of the multidistrict litigation on a separate track
`would continue to sharpen all interested parties’ views of
`mutually beneficial settlement values.
`
`Finally, we cannot help noting that the casualness of the
`calculations supporting the Court’s projections engenders
`doubt as to whether they were factual findings at all, but instead
`back-of-the-envelope forecasts of hypothetical worst-case
`scenarios. Still, to the extent they were findings of fact, we
`cannot say these were inferences permissibly drawn and
`entitled to deference. See Universal Mins., 669 F.2d at 102.
`Hence, they were clearly erroneous. And as we locate no other
`inferences or support in the record to bear the Court’s assertion
`that the “talc liabilities” “far exceed [LTL’s] capacity to satisfy
`[them],” we cannot accept this conclusion either.16 App. 23
`(Mot. to Dismiss Op. 23).
`
`
`16 Because we arrive at the same result assuming the
`Bankruptcy Court was correct to determine LTL was
`responsible to indemnify J&J for all talc costs it incurs, we
`need not opine on this conclusion. Still, we note certain
`
`
`
`51
`
`
`
`Case: 22-2003 Document: 178 Page: 6 Date Filed: 03/31/2023
`
`virtually all multidistrict ovarian cancer claims as well as
`corresponding additional claims in the Imerys bankruptcy.
`And as noted, we view all this against a pre-bankruptcy
`backdrop where Old Consumer had success settling claims or
`obtaining dismissal orders, and where, at trial, ovarian cancer
`plaintiffs never won verdicts that withstood appeal outside of
`Ingham and mesothelioma plaintiffs had odds of prevailing
`that were less than stellar.
`
`these facts—presented by J&J and LTL
`From
`themselves—we can infer only that LTL, at the time of its
`filing, was highly solvent with access to cash to meet
`comfortably its liabilities as they came due for the foreseeable
`future. It looks correct to have implied, in a prior court filing,
`that there was not “any imminent or even likely need of [it] to
`invoke the Funding Agreement to its maximum amount or
`anything close to it.” App. 3747 (LTL’s Obj. to Mots. for Cert.
`of Direct Appeal 22) (emphasis added). Indeed, the Funding
`Agreement itself recited that LTL, after the divisional merger
`and assumption of that Agreement, held “assets having a value
`at least equal to its liabilities and had financial capacity
`sufficient to satisfy its obligations as they become due in the
`ordinary course of business, including any [t]alc [r]elated
`[l]iabilities.” App. 4313 (Funding Agreement 1, ¶ E)
`(emphasis added). This all comports with the theme LTL
`proclaimed in this case from day one: it can pay current and
`future talc claimants in full. See App. 630 (Transcript of N.C.
`“First Day” Hearing, October 20, 2021) (LTL’s counsel telling
`the North Carolina bankruptcy court in his opening remarks
`that “[LTL], New [Consumer], and J&J believe that $2 billion
`exceeds any liability [LTL] could reasonably have for talc-
`related claims . . . .” (emphasis added)).
`
`
`
`
`53
`
`
`
`Case: 22-2003 Document: 178 Page: 7 Date Filed: 03/31/2023
`
`accrue to the benefit of all, or nearly all, stakeholders. Thus
`we need not lay down a rule that no nontraditional debtor could
`ever satisfy the Code’s good-faith requirement.
`
`But here J&J’s belief that this bankruptcy creates the
`best of all possible worlds for it and the talc claimants is not
`enough, no matter how sincerely held. Nor is the Bankruptcy
`Court’s commendable effort to resolve a more-than-thorny
`problem. These cannot displace the rule that resort to Chapter
`11 is appropriate only for entities facing financial distress.
`This safeguard ensures
`that claimants’ pre-bankruptcy
`remedies—here, the chance to prove to a jury of their peers
`injuries claimed to be caused by a consumer product—are
`disrupted only when necessary.
`
`Some may argue any divisional merger to excise the
`liability and stigma of a product gone bad contradicts the
`principles and purposes of the Bankruptcy Code. But even that
`is a call that awaits another day and another case. For here the
`debtor was in no financial distress when it sought Chapter 11
`protection. To ignore a parent (and grandparent) safety net
`shielding all liability then foreseen would allow tunnel vision
`to create a legal blind spot. We will not do so.
`
`Because it abused its discretion in denying the motions
`to dismiss, wWe thus reverse the Bankruptcy Court’s order
`denying the motions to dismiss and remand this case with the
`instruction to dismiss LTL’s Chapter 11 petition. Dismissing
`its case annuls the litigation stay ordered by the Court and
`makes moot the need to decide that issue.
`
`
`
`58
`
`
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
