Johnson & Johnson talc claimants committee eyes $30 billion fraudulent transfer lawsuit

By Sarah Lizee

Olympia, Wash., May 12 – The official committee of talc claimants of Johnson & Johnson subsidiary LTL Management LLC has filed a motion seeking standing to pursue a $30 billion fraudulent conveyance complaint, according to a Thursday press release from the group.

The committee, which has already filed a motion in the U.S. Bankruptcy Court for the District of New Jersey seeking to have the bankruptcy case dismissed, said this may be one if not the largest fraudulent transfers in U.S. history.

The group is seeking dismissal on the grounds that, among other things, LTL can’t establish financial distress and, therefore, its second bankruptcy was not filed in good faith.

The committee’s standing motion argues that if LTL is ultimately successful in establishing financial distress, it intentionally manufactured that distress by giving up contractual rights against its parent, Johnson & Johnson, worth billions of dollars.

The group said it seeks standing to file a complaint to avoid and recover that transfer for the benefit of all talc claimants.

“As the Third Circuit court stated in its decision dismissing LTL's first bankruptcy petition, LTL's original 2021 funding agreement with J&J was ‘not unlike an ATM disguised as a contract’ and provided LTL with sufficient funding to pay its talc liabilities inside or outside of the bankruptcy system,” the committee said in the release.

“In an attempt to generate the appearance of financial distress, LTL replaced its 2021 funding agreement with an agreement worth tens of billions of dollars less.”

In its motion, the committee states that if LTL can prove that it is in financial distress, then it “became distressed by committing fraud, and colorable claims exist to undo that fraud (and, therefore, the financial distress), as the Third Circuit recognized.”

The group also argues that if the 2021 funding agreement was “void or voidable” as the debtor now contends, then the entire divisional merger that created the debtor and assigned all of J&J's talc liability to it, is avoidable as a fraudulent transfer.

“[A]ll roads lead to the same place – if LTL can somehow establish financial distress, then it necessarily follows that J&J orchestrated the largest fraudulent transfer in United States history, it is just a question of when,” the committee said in the motion.

Johnson & Johnson is a consumer products company based in New Brunswick, N.J. The LTL Management subsidiary filed its initial Chapter 11 bankruptcy petition on Oct. 14, 2021 under case number 21-30589. The new case was filed on April 4 under case number 23-12825.

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