MARYELLEN NOREIKA, District Judge.
Before the Court is Johnson & Johnson and Johnson & Johnson Consumer Inc.'s (collectively "Johnson & Johnson" or "Petitioners") motion to fix venue (D.I. 1) in this Court and to transfer approximately 2,400 state court tort cases ("State Court Talc Claims" or "Talc Claims") here pursuant to 28 U.S.C. §§ 157(b)(5) and 1334(b). Numerous parties filed briefs in opposition to the motion. (D.I. 37, 45, 46, 48, 49, 50, 53, 55, 56, 57, 58). For the forgoing reasons, the Court DENIES the motion to fix venue in this district.
Roughly 2,400 personal injury and wrongful death actions have been filed against Johnson & Johnson in various state courts across the United States alleging that the Petitioners: (1) are directly liable for placing asbestos-containing talc products into the stream of commerce, (2) failed to warn customers against known risks, (3) breached express and implied warranties, and (4) acted intentionally and/or negligently leading to the development of ovarian and non-ovarian cancers. (D.I. 46 at 7). The talc in Johnson & Johnson products has historically been provided by Imerys Talc America, Inc. ("ITA") (collectively with Imerys Talc Vermont, Inc. and Imerys Talc Canada Inc., the "Debtors"), or their successors in interest.
(D.I. 4, Ex. 2) (emphasis added). The 2001 Agreement similarly provides:
(Id., Ex. 3) (emphasis added).
On February 13, 2019, facing personal injury and wrongful death claims around the country relating to their talc, Debtors commenced voluntary chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware. All talc-related claims against Debtors have been stayed because of the bankruptcy filing. See 11 U.S.C. § 362. On April 18, 2019, Johnson & Johnson filed this motion to fix venue arguing that this Court has jurisdiction over the claims pursuant to 28 U.S.C. § 1334(b). (D.I. 1). Contemporaneously with that filing, Johnson & Johnson began filing notices of removal for all State Court Talc Claims, arguing that each should be heard in federal court pursuant to 28 U.S.C. § 1334(b). (D.I. 46 at 8). In the months since removal, the Court is aware that at least 346 of these actions have been remanded back to state courts. (D.I. 92). The Court is not aware of any case in which a federal district judge has found subject matter jurisdiction over a removed State Court Talc Claim against Johnson & Johnson.
Johnson & Johnson argues that the Court should fix venue for roughly 2,400 tort cases here in the District of Delaware because: (1) 28 U.S.C. § 1334(b) provides the Court with "related to" jurisdiction over the many state law claims because they affect Debtors' estates, (D.I. 2 at 2); and (2) abstention over the State Court Talc Claims is not warranted because "these claims are overwhelming nationwide state courts." (Id.). As discussed below, the Court disagrees. Johnson & Johnson has not met its burden to establish that "related-to" subject matter jurisdiction exists over State Court Talc Claims, and, even if it had, this Could would abstain from hearing the roughly 2,400 cases in this district.
"[F]ederal courts are courts of limited jurisdiction and have authority to act only where a statute confers it." Kaufman v. Liberty Mut. Ins. Co., 245 F.2d 918, 919 (3d Cir. 1957); see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Thus, before fixing venue, the Court must determine whether subject matter jurisdiction exists over the matters that Petitioners seek to bring before it. See Stern v. Marshall, 564 U.S. 462, 479-80 (2011). "[T]he party asserting federal jurisdiction in a removal case bears the burden of showing . . . that the case is properly before the federal court." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir. 2007) (citing Samuel-Bassett v. Kia Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004). Here, Johnson & Johnson asserts that subject matter jurisdiction exists over the Talc Claims under the "related to" prong of 28 U.S.C. § 1334(b). Section 1334 provides, in pertinent part, that ". . . the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b) (emphasis added). With respect to "related-to" jurisdiction, the Third Circuit has adopted an "any conceivable effect" test, stating:
In re W.R. Grace & Co., 591 F.3d 164, 171 (3d Cir. 2009) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984)). Though the language first outlined in Pacor, Inc. v. Higgins suggests a permissive and broad test for finding "related-to" jurisdiction, the Third Circuit has repeatedly reiterated that "any conceivable effect" does not encompass scenarios where such an effect would only arise as a result of another lawsuit. See e.g., id.; In re Combustion Eng'g, Inc., 391 F.3d 190 (3d Cir. 2004), as amended (3d Cir. 2005) ("any indemnification claims against Combustion Engineering resulting from a shared production facility would require the intervention of another lawsuit to affect the bankruptcy estate, and thus cannot provide a basis for `related to' jurisdiction."); In re Fed.-Mogul Glob., Inc., 300 F.3d 368, 382 (3d Cir. 2002) ("The test articulated in Pacor for whether a lawsuit could `conceivably' have an effect on the bankruptcy proceeding inquires whether the allegedly related lawsuit would affect the bankruptcy without the intervention of yet another lawsuit.").
Johnson & Johnson argues that this Court has related to subject matter jurisdiction over the Talc Claims because: (i) the agreements between Johnson & Johnson and Debtors create indemnification obligations that will "immediately impact" the bankruptcy estates; (ii) Johnson & Johnson and Debtors have shared insurance, which will impact the bankruptcy estates; and (iii) Johnson & Johnson and Debtors share an identity of interest "because a claim against J&J is, in essence, a claim against Imerys." (D.I. 2 at 10-14). The Court disagrees.
Johnson & Johnson fails to demonstrate that the Plaintiffs'
Here, Johnson & Johnson fails to make a cogent argument supporting a clearly established and accrued right to indemnification or defense from the Debtors, rather than potential third party claims for such. In the brief accompanying Petitioners' motion to fix venue, Johnson & Johnson makes no argument that it has such a right to indemnification, but instead contends that contractual language automatically vested Debtors with a duty to defend Johnson & Johnson. (D.I. 2 at 11). In Johnson & Johnson's reply brief, it claims that the "right to demand indemnification and defense costs is clearly established." (D.I. 81 at 12). That brief, however, is devoid of any argument that the right to indemnification was vested upon the filing of Plaintiffs' claims.
The indemnification provisions in the 1989 Agreement and 2001 Agreement each state "[Debtors] shall indemnify, defend and hold harmless [Johnson & Johnson] . . . from and against all liabilities arising out of any violation by Seller of any law, ordinance, [or] regulation . . . provided however that Seller shall not indemnify [Johnson & Johnson] for any such liabilities to the extent that such liabilities arise from (i) the acts or omissions of [Johnson & Johnson]; or (ii) the acts or omissions of Seller which were directed by [Johnson & Johnson]." (D.I. 4, Ex. 2-3). Each of these provisions is set forth in its own "indemnification" paragraph and includes clear qualifications that must be met before each applies. First, Johnson & Johnson's right to indemnity from Debtors arises only when it is facing liability based on a violation of law, ordinance, or regulation by Imerys. Id. Second, Johnson & Johnson has no right to indemnification from Debtors if the liabilities relate to the acts or omissions of Johnson & Johnson or those directed by Johnson & Johnson. Id. Petitioners' brief notes these contingencies by stating, "[s]hould plaintiffs secure favorable verdicts, in addition to J&J's claims for defense costs, its claims for indemnification will crystalize against the estates." (D.I. 81 at 13 n.24). That Johnson & Johnson offers it may have "claims for" — as opposed to a "right to" — indemnification, signals that the indemnity is neither accrued nor vested. The Court agrees with Judge Kearney from the Eastern District of Pennsylvania that "[t]his qualified language does not evince the parties' intent to extend automatic indemnity where Johnson & Johnson's own acts or omissions are the subject of litigation." See Kleiner v. Rite Aid Corp., No. 19-1700, 2019 WL 2462967, at *6 (E.D. Pa. June 11, 2019). Should any of the Plaintiffs succeed against Johnson & Johnson in Talc Claims cases, an indemnification from Debtors would still be contingent upon findings that Johnson & Johnson's liabilities arose from a violation of law by Debtors and did not arise from the acts or omissions of Petitioners. Because such contingencies exist, a right to indemnification is not clearly established or vested at the onset of the Talc Claims, but is instead dependent upon fact finding in an ancillary proceeding. For this reason, the Court cannot find that indemnification serves as a basis for related to jurisdiction.
Alternatively, Johnson & Johnson argues that the indemnification provisions impose upon Debtors a separate and unqualified duty to defend Johnson & Johnson against State Court Talc Claims. (D.I. 81 at 18). Johnson & Johnson states "[t]his duty to defend accrues before any factual finding and, certainly before entry of any judgment," and "does not merely pertain to legal obligations that are statutory or regulatory," but "includes the common law, product liability law, as well as the statutory provisions under which plaintiffs bring claims against J&J." (Id. at 8, 16). Moreover, Johnson & Johnson contends that the duty is not contingent upon a finding that it has not engaged in or directed misconduct because the exclusionary clause is only directed to indemnification. (Id. at 16-17). Specifically, Petitioners claim that because the exclusionary clause states only that Debtor "shall not indemnify [Johnson & Johnson] for any such liabilities" the duty to defend is not so limited.
In support of its position, Petitioners analogize this case to In re Lower Bucks Hosp., in which a district court affirmed the exercise of "related to" jurisdiction over a duty to defend outlined in a contractual provision that stated the debtor would "indemnify and hold harmless" the non-debtor against "any and all claims" arising out of the transaction, except for "malfeasance or nonfeasance in office, bad faith, gross negligence, willful [sic] misconduct, fraud or deceit.". 488 B.R. at 314-16. In that case, however, the provision at issue also contained language explicitly stating "the [non-debtor] may direct [the debtor] to assume the defense of a claim and any action brought thereon and pay all reasonable expenses incurred therein." Id. The court found that "related-to" jurisdiction existed "because the filing of the class action against [non-debtor] had an immediate effect on [debtor's] bankruptcy estate when it triggered [non-debtor's] claim for defense costs against [debtor]." Id. at 312. Here, however, the provisions include no language authorizing Johnson & Johnson to direct Debtors to assume the defense of, or pay the costs of defending, a claim once filed.
Instead, Petitioners ask the Court to infer that such an automatic obligation exists because the indemnification provisions include the word defend. Petitioners argue that the exclusionary language "describes the circumstances under which Debtors have no obligation to indemnify J&J, not . . . a condition precedent to Debtors; defense obligations" and thus "Debtors' duty to defend is not contingent upon a finding that J&J has not engaged in or directed misconduct." (D.I. 81 at 17). The Court disagrees. Johnson & Johnson cannot pick and choose which parts of the indemnity clause it seeks to enforce. While it is true that basic contract interpretation provides that when parties use different language in different parts of a contract the Court should interpret the parties as intending different meanings, it also remains true that the Court should not divorce contract language from its plain context and the intent of the parties.
Here, the supposed "duty to defend" is located in the "indemnity" section of the 1989 Agreement and the 2001 Agreement. If the parties had intended an automatic duty to defend, the Court expects that they would have included language similar to that in In re Lower Bucks. Instead, the parties agreed that Debtors would "indemnify, defend and hold harmless" Johnson & Johnson for liabilities relating to violations of law by Debtors. This strongly suggests that there is no stand-alone duty to defend, but instead potential indemnity for defense costs if liability arises from a violation of law by the Debtors. This interpretation is validated by the Petitioners' own briefing on this issue. In the cases removed to this Court by Johnson & Johnson, the Petitioners responded to motions to remand arguing that the related-to jurisdiction arose from "indemnifiable defense costs." See e.g., Defendant Johnson & Johnson and Johnson & Johnson Consumer Inc.'s Memorandum of Law in Opposition to Plaintiff's Motion to Remand, McGonigle v. Johnson & Johnson, No. 19-724 (MN) (D.I. 9). Indemnifiable defense costs, like indemnification generally, are contingent upon the limitations of the exclusionary clauses of the provisions and can only be determined by yet another lawsuit. Moreover, even if the Court were to accept that the exclusionary provisions that follow the "provided however" language did not apply to the alleged "duty to defend," such a duty would
Johnson & Johnson argues that its shared insurance policies with Debtors — from when the entity was a wholly owned subsidiary of Johnson & Johnson — are sufficient to establish "related to" jurisdiction over the 2,400 cases because "shared policies are considered property of the debtor's estate and prosecution of a claim against a co-insured non-debtor could deplete proceeds available to the debtor reducing assets available to the bankruptcy estate." (D.I. 2 at 12).
In In re Combustion Engineering, Inc., the Third Circuit considered a claim of "related-to" jurisdiction premised upon shared insurance. The Court found there was insufficient evidence in the record to resolve the issue of shared insurance and declined to exercise jurisdiction. In its ruling, the Court noted that "[c]ourts finding `related to' jurisdiction over claims against non-debtors based in part on shared insurance policies have relied not only on extensive record findings regarding the terms and operation of the subject policies, but also on additional evidence of automatic liability against the debtor." In re Combustion Eng'g, Inc., 391 F.3d at 226; see also W.R. Grace, 591 F.3d at 172. Here, Johnson & Johnson also fails to offer a sufficient record that the terms and operation of the policies establish subject matter jurisdiction. In its opening brief, Johnson & Johnson argues that certain of its commercial general liability and excess liability policies extend to cover affiliated or subsidiary companies, including Debtors. (D.I. 2 at 5-6). It also argues that under the 2001 Agreement, Debtor was required to "procure and maintain . . . valid and collectible insurance policies," naming Johnson & Johnson as an additional insured. (Id. at 6).
Certain Plaintiffs respond that: (1) shared insurance alone is insufficient to support related-to jurisdiction; (2) Johnson & Johnson has failed "to provide the allegedly-shared policies' effective dates, the coverage provided under the policies for the state-court claims, the limits of liability, and the amounts of coverage remaining;" and (3) even so, "the possibility that J&J may deplete insurance to which Debtors might otherwise be entitled is far too thin a reed on which to rest subject matter jurisdiction for over 2,400 state law cases." (D.I. 46 at 12-13; D.I. 53 at 12-13).
In reply, and seemingly to counter the allegation by other courts that "they did not include their allegedly shared insurance policies"
Moreover, as it remains unclear whether Debtors would have a duty to indemnify Johnson & Johnson with respect to the State Court Talc Claims, or vice-versa, it is equally uncertain whether these insurance policies would have any effect on the Debtors' bankruptcy estate. In In re Combustion Eng'g, the court required evidence of "automatic liability" before a finding could be made that the insurance helped establish "related-to" jurisdiction. No such evidence has been provided here. The Court will not rest subject matter jurisdiction over 2,400 independent state law claims against Johnson & Johnson on insurance policies that Petitioners submitted with a reply brief and for which little information is known. Though insufficient findings for determination of subject matter jurisdiction may generally merit some discovery to further clarify the issue, the Court does not find such discovery excursion necessary given its finding infra that abstention is appropriate for these cases.
Petitioners and Debtors do not share an identity of interest sufficient to establish "related-to" jurisdiction. Johnson & Johnson argues that "a claim against J&J is,
Petitioners contend that "[e]ach Talc Claim plaintiff can draw a direct line between the bottles of J&J's talcum powder products allegedly used and the Debtors' talc" and thus "each claim against J&J by its terms directly implicates the Debtors." (Id. at 14). Johnson & Johnson's theory of unity of interest rests solely on Debtors' status as a supplier of talc for certain Johnson & Johnson products beginning in 1966. To support this theory, Petitioners cite In re Dow Corning Corp., 86 F.3d 482 (6th Cir. 1996) for the proposition that Debtors' role as a supplier creates a unity of interest between the parties. Johnson & Johnson argues that the Dow court concluded "related-to" jurisdiction existed over claims against a non-debtor manufacturer of silicone breast implants where the debtor had supplied the silicone materials to the non-debtors. Id. at 492, 493-94. The court, however, largely based its conclusions on findings of the corporate relatedness of the debtors and non-debtors
Here, Johnson & Johnson has failed to establish the hallmarks upon which courts have based an identity of interest. There is no corporate relatedness, no automatic indemnity, no automatic shared or mutual defense obligations, and no automatic liability upon debtor for claims against a non-debtor. Put simply, Debtor cannot be said to be the real party defendant in the State Court Talc Claims against Johnson & Johnson nor are these claims against Johnson & Johnson in essence claims against Imerys. For this reason, Johnson & Johnson has failed to establish a unity or identity of identity of interests necessary to invoke federal subject matter jurisdiction.
Certain Plaintiffs argue that, even if "related-to" subject matter jurisdiction exists, the Court should exercise its discretion to abstain from fixing venue over these 2,400 State Court Talc Claims. (See e.g. D.I. 46 at 14; D.I. 53 at 15; D.I. 87 at 2). The Court agrees that such abstention is appropriate. Section 1334(c)(1) states that "nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising or related to a case under title 11." 28 U.S.C. § 1334(c)(1). In deciding whether abstention is proper, courts have utilized a twelve-factor test:
In re Mobile Tool Int'l, 320 B.R. 552, 556-57 (Bankr. D. Del. 2005) (citing LaRoche Indus. v. Orica Nitrogen LLC, 312 B.R. 249, 253-54 (Bankr. D. Del. 2004)). The Court need not consider all factors and no one factor is determinative, but instead "should apply these factors flexibly, for their relevance and importance will vary with the particular circumstances of each case." In re D'Angelo, 491 B.R. 395, 406 (E.D. Pa. 2013) (citing Shalom Torah Centers v. Philadelphia Indem. Ins. Companies, No. 10-6766, 2011 WL 1322295, at *4 (D.N.J. Mar. 31, 2011); Monmouth Investor, LLC v. Saker, No. 12-4845, 2010 WL 143687, at *4 (D.N.J. Jan. 12, 2010)).
A review of the factors, and the necessary weighing thereof, counsels the Court that discretionary abstention is proper. Johnson & Johnson seeks to fix venue here for roughly 2,400 state law actions that have been pending for months, if not years, in state trial courts around the country. These cases stand in various procedural postures.
Johnson & Johnson contends that "[n]one of the [state] law is `difficult, unsettled, or unfamiliar to a federal court.'" (D.I. 2 at 19). While any one state's tort and product liability law may not be unsettled or difficult in nature, the expectation that an undertaking of roughly 2,400 cases under, ostensibly, each of the fifty states' personal injury and wrongful death laws would not be difficult rings hollow. The judges in the states who are already handling these cases are better suited to hear the claims before them than is this Court, which would have to hear thousands of cases and apply different state laws to each. This factor weighs in favor of abstention.
Moreover, the Court is not convinced how, if at all, the fixture of these cases here would benefit the bankruptcy proceeding and provide for a more efficient handling of Debtors' estate. If anything, the transfer of these cases would grind the wheels of justice to a halt, as cases at all stages of development are fixed here and added to an already-busy docket. According to the most recent data provided by the United States Courts, 2,279 civil cases were filed in this district between April 1, 2018 and March 30, 2019. See Administrative Office Of The United States Courts, Table C-3-U.S. District Courts-Civil Cases Commenced, By Nature Of Suit And District, During The 12-Month Period Ending March 31, 2019, https://www.uscourts.gov/statistics/table/c-3/federal-judicial-caseload-statistics/2019/03/31. Dividing that number among the four district judges leaves the undersigned with roughly 550 cases new cases in the last calendar year. To suggest that adding nearly five times that number of cases to the docket, would
Johnson & Johnson further argues that the effort to fix venue in federal court in Delaware is not forum shopping simply because Imerys chose to file for bankruptcy in Delaware. Even assuming arguendo that the 2,400 claims "relate-to" the bankruptcy proceeding, the fact remains that Johnson & Johnson seeks to move these pending state court cases to federal court for its own benefit. Without commenting on the wisdom of this strategy, the effort is patently forum shopping. See In re Fed.-Mogul Glob., Inc., 282 B.R. 301, 316 (Bankr. D. Del. 2002) ("the possibility that the movants are forum shopping is too obvious to be belabored. Some jurisdictions have been notoriously unfavorable to asbestos defendants. Movants understandably believe that they would gain an advantage if the claims against them were centralized in a federal court . . . ."). The In re Fed.-Mogul court noted that even where certain benefits to the bankruptcy estate may exist, they "do not . . . justify the affront to the state and federal comity inherent in the removal of solvent defendants from ongoing state lawsuits into a federal bankruptcy." Id. This factor weighs in favor of abstention.
Lastly, the degree of relatedness between the Plaintiffs' claims and the Imerys bankruptcy is not strong. The connection relies solely on Johnson & Johnson's arguments above relating to duties to indemnify and defend, joint insurance, and identity of interest. In various courts, however, Petitioners have represented that indemnity and insurance were unlikely to be implicated in the underlying actions. See Removed State Court Talc Actions v. Johnson & Johnson, No. CV 19-3080, 2019 WL 2191808, at *3 (C.D. Cal. May 21, 2019) ("Johnson & Johnson represented in its discovery disclosures that its indemnification and insurance agreements were `unlikely to be implicated' by or were `not relevant' to the plaintiffs' claims against it."). Because the claims against the Petitioners are about their own conduct — not to violations of law, regulation, or ordinance by Imerys — any resolution of the underlying state court cases would not determine the liability of the Debtor. Further third-party litigation would be required. For this reason, the Court cannot find any significant relatedness between the State Court Talc Claims and Imerys. This factor weighs in favor of abstention.
Reviewing these factors together, the Court finds that even if subject matter jurisdiction existed, it would be both in the interest of justice and the interest of comity with the state courts that this Court exercise its discretion to abstain from merging nearly 2,400 pending state law cases for adjudication here in the District of Delaware.
For the foregoing reasons, Petitioners motion to fix venue (D.I. 1) is DENIED. An appropriate order will follow