Judge Hopes To Avoid Vote Issue Repeat In Talc Ch. 11 Plan

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Law360 (October 28, 2024, 10:01 PM EDT) — A Delaware bankruptcy judge on Monday told a pair of talc producers that the proposed creditor voting procedures on their joint Chapter 11 plans will need some work to avoid a repeat of the voting problems that derailed a previous attempt to settle asbestos injury claims.

Toward the end of a full day of arguments from dissenting creditors and insurance carriers who urged U.S. Bankruptcy Judge Laurie Selber Silverstein to reject the plans proposed by Imerys Talc America Inc. and its former parent company Cyprus Mines Corp., the judge agreed some changes were needed, including to the mass ballots law firms would submit on behalf of their asbestos injury claimant clients.

Imerys sought Chapter 11 protection in 2019, and Cyprus followed suit in 2021, both aiming to address a growing pile of lawsuits accusing them of supplying talc contaminated with asbestos.

Imerys had submitted a Chapter 11 plan to the court in 2021, but it failed after Judge Silverstein ruled roughly 16,000 creditor votes for the plan had been invalid, finding the law firm that submitted a “master ballot” on behalf of talc claim creditors hadn’t taken steps to ensure the group of claimants were entitled to vote.

Imerys and Cyprus then ended mediation with creditors and insurers and submitted joint plans in February that, in the most recently revised version, will create a nearly $1.1 billion trust fund to pay talc injury claims.

“Sufficient to say we’ve worked really, really hard to get here,” Imerys counsel Kimberly Posin said.

The trust will be partially funded by a $505 million settlement approved by the court earlier this year of Imerys and Cyprus’ indemnification claims against Johnson & Johnson, the companies’ major talc customer. J&J itself has been attempting to resolve its talc liabilities in bankruptcy court since 2021.

The debtors will also assign policies from nonsettling insurers to the trust.

All talc injury claims against the debtors would be channeled to the trust, with 60% of the funds earmarked for mesothelioma claims and 40% for ovarian cancer claims.

This division formed the basis of objections lodged by a collection of nonsettling insurance companies and by the law firm of Aylstock Witkin Kreis & Overholtz, which represented talc claimants in the case.

While counsel for the debtors argued it was based on an assessment of the total potential value of the claims — saying dozens of mesothelioma claims have won in jury trials compared to only one ovarian cancer claim — the objectors argued it was improper discrimination within a class.

“By design one category within the class is getting substantially worse treatment,” Aylstock Witkin counsel Samuel Kidder said.

Dissenters argued this and other factors — including the creation of a joint trust without consolidating the bankruptcy cases and a lack of description about how the trust will evaluate indirect claims — render the plan legally unconfirmable, and that going through the voting process would be a waste of time.

“This plan really is DOA. You can decide it now or decide it at confirmation,” insurer counsel George Calhoun said.

They also argued the disclosure failed because it does not explain the rationale behind various provisions regarding claim payments. They were joined by the U.S. Trustee’s Office in complaining the statement does not provide enough information about the parties that would receive claim releases.

“There are pages and pages of third parties being released with no information about them,” Calhoun said.

Judge Silverstein agreed there was insufficient information about the companies receiving claim releases due to settlements with the debtors, but that adding information on their affiliates was impractical.

The voting procedures also came under fire, particularly a proposal to allow lung cancer claimants $1 claims for voting purposes and the information voters would be required to give on their ballots.

Counsel for the debtors argued it was sufficient that claimants or their counsel would have to certify they had a valid claim, but insurer counsel argued they should be required to name the product that produced the exposure and the date it was purchased.

Insurer counsel Tancred Schiavoni said nearly all the claims in the cases are based on the purchase of Johnson & Johnson products — and thus already settled by the J&J deal — and that not requiring claimants to be specific opened the door to tens of thousands of ineligible claims.

“We’re opening this now as a machine to make insurance claims,” he said.

Judge Silverstein did say attorneys filing master ballots would need to certify individual clients were eligible to vote, saying she did not want a repeat of the 2021 voting issues, but that requiring a description of product purchases was going too far.

“It wouldn’t be required for a proof of claim,” she said.

Imerys is represented by Mark D. Collins, Michael J. Merchant and Amanda R. Steele of Richards Layton & Finger PA and Jeffrey E. Bjork, Kimberly A. Posin and Helena G. Tseregounis of Latham & Watkins LLP.

Cyprus Mines is represented by Kurt F. Gwynne, Jason D. Angelo, Paul M. Singer and Luke A. Sizemore of Reed Smith LLP.

Aylstock Witkin is represented by Deirdre M. Richards of Elliott Greenleaf PC and Michael L. Tuchin, Samuel M. Kidder and Nir Maoz of KTBS Law LLP.

The insurers are represented by White and Williams LLP, Plevin & Turner LLP, Kennedys LLP, Ifrah PLLC, Klehr Harrison Harvey Branzburg LLP, Ruggeri Parks Weinberg LLP, Dilworth Paxson LLP, Stamoulis & Weinblatt LLC and O’Melveny & Myers LLP.

The U.S. Trustee’s Office is represented in-house by Linda Richenderfer.

The cases are In re: Imerys Talc America Inc. et al., case number 1:19-bk-10289, and In re: Cyprus Mines Corp., case number 1:21-bk-10398, in the U.S. Bankruptcy Court for the District of Delaware.

–Additional reporting by Clara Geoghegan and Ben Zigterman. Editing by Alex Hubbard.

By: Rick Archer