U.S. Bankruptcy Court for the Western District of North Carolina, Charlotte Division, November 16, 2021

Debtor LTL Management LLC (LTL) was created through a corporate restructuring before the filing of the instant Chapter 11 case. Johnson & Johnson Consumer Inc. (Old JJCI), a subsidiary of Johnson & Johnson (J&J), was replaced with two new corporate entities: (1) LTL, a Texas limited liability company that converted into a North Carolina limited liability company, and (2) a Texas limited liability company that was merged into J&J and became Johnson & Johnson Consumer Inc. (New JJCI). According to LTL, the purpose of the restructuring was to allow LTL “to fully resolve talc-related claims through a Chapter 11 reorganization without subjecting the entire J&J enterprise to a bankruptcy proceeding.”

As a result of the restructuring, LTL received specific “limited assets” from Old JJCI, as well as Old JJCI’s liabilities related to talc claims. The claims include approximately 38,000 ovarian cancer cases and more than 430 mesothelioma cases. LTL operates out of New Jersey, lists New Jersey as its principal place of business and mailing address, and its employees work in New Jersey. In addition, Johnson & Johnson Services, Inc., a New Jersey corporation, provides LTL with accounting services, human resources, tax support, office space, and other facilities located in New Jersey.

The Bankruptcy Administrator (BA) filed a motion to transfer the case to the District of New Jersey. The court entered a show cause order, directing LTL to explain why the case should not be transferred to a different venue. LTL opposed any transfer of the case.

“Venue is proper for a bankruptcy case in any judicial district where the LTL’s ‘domicile, residence, principal place of business … or principal assets’ have been located for ‘a longer portion’ of the 180 days prior to the petition date.” The court stated that venue was proper in the Western District of North Carolina because LTL was a North Carolina entity at the time of filing the case. The court noted that the venue could still be transferred to another district “in the interest of justice or for the convenience of the parties.” The court concluded that both the interests of justice and the convenience of the parties justified a transfer to the District of New Jersey.

A determination of whether to transfer a case based on the convenience of the parties involves the analysis of six factors: (1) the proximity of creditors of every kind to the court; (2) the proximity of the debtor to the court; (3) the proximity of the witnesses necessary to the administration of the estate; (4) the location of the assets; (5) the economic administration of the estate; and (6) the necessity for ancillary administration if a liquidation should occur. The fifth factor is given the most weight. The court found that the factors weighed in favor of a transfer to the District of New Jersey. Specifically, it noted the following: LTL’s strong connections to New Jersey, the proximity of witnesses, creditors, and other interested parties to New Jersey, and the potential of the multi-district litigation (currently in the U.S. District Court for the District of New Jersey) to assist in any administration of the estate. As to the interests of justice, the court found that the transfer would “promote an effective administration of the estate, fairness, and judicial economy.”

Read the full decision here.