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.
2

 BY THE COURT,

 s/ THOMAS L. AMBRO

Circuit Judge

Dated: March 31, 2023

JK/cc: All Counsel of Record
Exhibit A

Revised Text
35 

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 goodfaith 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.”). 
51 

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 
53 

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. 

From these facts—presented by J&J and LTL 

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 talcrelated claims . . . .” (emphasis added)).
58 

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.