Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 1 of 14

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

)
In re: ) Chapter 11
)
IMERYS TALC AMERICA, INC., et al.,1 ) Case No. 19-10289 (LSS)
)
)
Debtors. ) Jointly Administered
)
) Re: Docket No. 1716

OBJECTION OF ARNOLD & ITKIN PLAINTIFFS TO MOTION OF DEBTORS FOR

ENTRY OF ORDER (I) APPROVING DISCLOSURE STATEMENT AND FORM AND
MANNER OF NOTICE OF HEARING THEREON, (II) ESTABLISHING
SOLICITATION PROCEDURES, (III) APPROVING FORM AND MANNER OF
NOTICE TO ATTORNEYS AND CERTIFIED PLAN SOLICITATION DIRECTIVE,
(IV) APPROVING FORM OF BALLOTS, (V) APPROVING FORM, MANNER, AND
SCOPE OF CONFIRMATION NOTICES, (VI) ESTABLISHING CERTAIN
DEADLINES IN CONNECTION WITH APPROVAL OF DISCLOSURE STATEMENT
AND CONFIRMATION OF PLAN, AND (VII) GRANTING RELATED RELIEF

Arnold & Itkin LLP (“Arnold & Itkin”), on behalf of certain personal injury

claimants (the “Arnold & Itkin Plaintiffs”), hereby objects (the “Objection”) to the Motion of

Debtors for Entry of Order (I) Approving Disclosure Statement and Form and Manner of Notice

of Hearing Thereon, (II) Establishing Solicitation Procedures, (III) Approving Form and

Manner of Notice to Attorneys and Certified Plan Solicitation Directive, (IV) Approving Form of

Ballots, (V) Approving Form, Manner, and Scope of Confirmation Notices, (VI) Establishing

Certain Deadlines in Connection with Approval of Disclosure Statement and Confirmation of

Plan, and (VII) Granting Related Relief [Docket No. 1716] (the “Motion”) and the Disclosure

Statement for Joint Chapter 11 Plan of Reorganization of Imerys Talc America, Inc. and its

1
The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are:
Imerys Talc America, Inc. (6358), Imerys Talc Vermont, Inc. (9050), and Imerys Talc Canada Inc. (6748). The
Debtors’ address is 100 Mansell Court East, Suite 300, Roswell, Georgia 30076.

DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 2 of 14

Debtor Affiliates Under Chapter II of the Bankruptcy Code [Docket No. 1715] (the “Disclosure

Statement”) filed by the above-captioned debtors and debtors in possession (the “Debtors”). In

support of its Objection2, the Arnold & Itkin Plaintiffs respectfully represent as follows:

Preliminary Statement

1. After nearly fifteen (15) months in chapter 11, the Plan Proponents filed

the Plan touting a global settlement that they contend will “address Talc Personal Injury Claims

in a fair and equitable manner.” However, the Plan is nothing more than a placeholder. It leaves

more questions unanswered than answered. Moreover, characterizing the settlement that is the

cornerstone of the Plan as “global” is wildly misleading because, although the Plan incorporates

a settlement between the Debtor-related entities and certain claimant representatives for

approximately $200 million, it leaves the indemnification claims against J&J and the Debtors’

rights under insurance policies unresolved—and they could be worth billions of dollars. Under

the Plan, the insurance and indemnification rights, which are undoubtedly the estates’ most

valuable assets, will be transferred away from the watchful eye of this Court to the Talc Personal

Injury Trust (the “Trust”). Yet, no Trust document is provided; the Disclosure Statement fails to

adequately disclose the terms of the Trust or the Trust distribution procedures; and the trustee or

party that will oversee the Trust is not identified.

2. Fatally, the Disclosure Statement reveals that the settled issues pale in

comparison to those that are not resolved. Specifically, the claims against J&J and the coverage

claims under the Talc Insurance Policies dwarf the projected value of the Imerys Settlement

2
Defined terms have the meaning ascribed to them in the Plan and Disclosure Statement.

2
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 3 of 14

Funds and the Imerys Cash Contribution. Even though the indemnification and insurance claims

are undoubtedly the estates’ largest assets, the Plan proposes to hand them over to the Trust

without any disclosure about the rules governing how these assets will be monetized for the

benefit of Talc Personal Injury Claimants.

3. Under the Plan, the Talc Personal Injury Claims are the only class entitled

to vote. However, the Disclosure Statement lacks the “who, what, where, when, how and why”

that these claimants need to make an informed decision. For example, claimants cannot tell,

among other things:

Who will control the trust or evaluate and determine their claims?

What are Trust’s assets worth and what are the projected claims
against the Trust?

Where will claims be evaluated (i.e., through some alternative

dispute mechanism or through a judicial process)?

When are claims expected to be resolved and paid?

How are claims against the Trust evaluated and what metrics will
be applied?

Why is the proposed settlement with the Debtor-related entities

fair?

4. The Arnold & Itkin Plaintiffs recognize that the overall structure of the

Plan—a victims’ trust and a channeling injunction—can be an effective and efficient means of

resolving mass tort claims in certain circumstances. The Arnold & Itkin Plaintiffs are willing to

work cooperatively with the Plan Proponents to fashion a viable plan. But as currently

constituted, the Plan is simply a placeholder and is so completely lacking in substance that it

cannot be confirmed and should not be sent out for solicitation. Accordingly, for the reasons set

3
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 4 of 14

forth herein, the Arnold & Itkin Plaintiffs believe that the Motion seeking approval of the

Disclosure Statement should be denied.

Background

5. On February 13, 2019 (the “Petition Date”), the Debtors filed voluntary

petitions in this Court commencing cases for relief under chapter 11 of the Bankruptcy Code.

The Debtors are operating their business and managing their properties as debtors in possession

pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been

appointed in these cases.

6. On May 15, 2020, the Debtors filed the Joint Chapter 11 Plan of

Reorganization of Imerys Talc America, Inc. and Its Debtor Affiliates Under Chapter 11 of the

Bankruptcy Code Filed by Imerys Talc America, Inc. [Docket No. 1714] (the “Plan”), the

Disclosure Statement, and the Motion.

7. The Arnold & Itkin Plaintiffs include more than two thousand (2,000) talc

personal injury claimants who will be classified as Class 4 “Talc Personal Injury Claims” under

the Plan and the sole impaired voting class.

Disclosure Statement Objections

A. The Disclosure Statement Should Not Be Approved Because It Does Not Contain
Adequate Information as Required by Section 1125 of the Bankruptcy Code

8. The Disclosure Statement fails to satisfy section 1125 of the Bankruptcy

Code in numerous material respects.

9. Under section 1125(b) of the Bankruptcy Code, a proponent of a plan and

disclosure statement has the burden of proving that the disclosure statement includes “adequate

4
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 5 of 14

information” for creditors and other parties in interest to make an informed judgment about the

plan. In determining whether a plan proponent has provided “adequate information” to creditors

and parties in interest, the standard is not whether the failure to disclose information would harm

creditors but whether “hypothetical reasonable investors receive such information as will enable

them to evaluate for themselves what impact the information might have on their claims and on

the outcome of the case, and to decide for themselves what course of action to take.” In re

Applegate Prop., Ltd., 133 B.R. 827, 831 (Bankr. W.D. Tex. 1991). “Creditors not only rely on

the disclosure statement to form their ideas about what sort of distribution or other assets they

will receive but also what risks they will face.” In re Radco Properties, Inc., 402 B.R. 666, 682

(Bankr. E.D.N.C. 2009). “As such, the importance of full and honest disclosure is critical and

cannot be overstated.” Id.

10. For a creditor to fairly evaluate the results of a proposed plan, the court

must ensure that a disclosure statement sets forth “all those factors presently known to the plan

proponent to bear upon the success or failure of the proposals contained in the plan.” See In re

Jeppson, 66 B.R. 269, 292 (Bankr. D. Utah 1986); In re Ferretti, 128 B.R. 16, 19 (Bankr. D.N.H.

1991) (holding that a proper disclosure statement must “clearly and succinctly inform the

average unsecured creditor what it is going to get, when it is going to get it, and what

contingencies there are to getting their [sic] distribution.”). Overall, adequate disclosure “is

crucial to the effective functioning of the federal bankruptcy system[;] . . . the importance of full

and honest disclosure cannot be overstated.” Ryan Operations G.P. v. Santiam-Midwest Lumber

Co., 81 F.3d 355, 362 (3d Cir. 1996). “The Third Circuit has observed that creditors and the

bankruptcy courts rely on the information in disclosure statements in evaluating the merits of

5
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 6 of 14

Chapter 11 plans.” In re Alston, 2016 Bankr. LEXIS 4510, at *22 (Bankr. M.D. Pa. Dec. 27,

2016) (citing Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 417 (3d Cir.

1988), cert. denied, 488 U.S. 967, 109 S. Ct. 495, 102 L. Ed. 2d 532 (1988)). “Given this

reliance, we cannot overemphasize the debtor’s obligation to provide sufficient data to satisfy the

Code standard of ‘adequate information.’“ Id.; see also In re Monroe Well Serv., Inc., 80 B.R.

324, 330 (Bankr. E.D. Pa. 1987) (a debtor must provide “[s]ufficient financial information . . . so

that a creditor (likened to a “hypothetical reasonable investor”) can make an “informed

judgment” whether to accept or reject the plan.”). The Debtors have the burden of proof to

demonstrate that the Disclosure Statement provides adequate information. In re Michelson, 141

B.R. 715, 719-20 (Bankr. E.D. Cal. 1992).

11. Whether a disclosure statement contains “adequate information” should be

assessed from the perspective of the claims or interest holders with the ability to vote. See In re

Phoenix Petroleum Co., 278 B.R. 385, 393 (Bankr. E.D. Pa. 2001) (citing In re Monroe Well

Serv., Inc., 80 B.R. 324, 330 (Bankr. E.D. Pa. 1987)); see also 11 Collier on Bankruptcy,

1125.03[1] (courts should “consider the needs of the claims or interest of the class as a whole

and not the needs of the most sophisticated or least sophisticated members of a particular class”).

12. In determining whether a disclosure statement contains adequate

information as required by section 1125 of the Bankruptcy Code, courts look to, inter alia,

whether the disclosure statement addresses the following topics:

 the events which led to the filing of a bankruptcy petition;

 the relationship of the debtor with its affiliates;

 a description of the available assets and their value;

6
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 7 of 14

 the anticipated future of the company;

 the source of information stated in the disclosure statement;

 the present condition of the debtor while in chapter 11;

 claims asserted against the debtor;

 the estimated return to creditors under a chapter 7

liquidation;

 the chapter 11 plan or a summary thereof;

 financial information, valuations, and projections relevant

to the creditors’ decision to accept or reject the chapter 11
plan;

 information relevant to the risks posed to creditors under

the plan;

 the actual or projected realizable value from recovery of

preferential or otherwise avoidable transfers;

 litigation likely to arise in a nonbankruptcy context; and

 tax attributes of the debtor.

See In re U.S. Brass Corp., 194 B.R. 420, 424-25 (Bankr. E.D. Tex. 1996). The proponent of a

disclosure statement bears the ultimate burden of persuasion. In re Am. Capital Equip., LLC,

688 F.3d 145, 155 (3d Cir. 2012) (“The debtor has the burden of proving that a disclosure

statement is adequate, including showing that the plan is confirmable or that defects might be

cured or involve material facts in dispute.”).

13. Here, as set forth below, the Disclosure Statement omits basic information

about matters of primary concern to creditors. Absent such disclosures, creditors have not been

7
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 8 of 14

provided with “adequate information” to make an informed decision as to whether to accept or

reject the Plan.

B. The Disclosure Statement Provides NO Information

About the Trust or the Trust Distribution Procedures

14. A disclosure statement must “clearly and succinctly inform the average

unsecured creditor what it is going to get, when it is going to get it, and what contingencies there

are to getting” a distribution. In re Ferretti, 128 B.R. 16, 19 (Bankr. D.N.H. 1991). The

Disclosure Statement fails to meet this standard.

15. The Disclosure Statement is inadequate because the basis for evaluating

claims, monetizing assets, and sharing funds among the different groups of holders of Talc

Personal Injury Claims has been left to the Talc Personal Injury Trust, through the Talc Personal

Injury Trust Documents and Trust Distribution Procedures (“TDPs”), which will not be disclosed

until after the hearing on the Motion. Consequently, holders of Talc Personal Injury Claims

cannot evaluate the fairness of the treatment of their claims under the Talc Personal Injury Trust

Documents and TDPs until such documents have been filed.

16. The Disclosure Statement has two short paragraphs about the Trust that

omit any specificity about the Trust or its governance or about any details of the mechanics of

resolving claims or any settlement criteria or matrices. Docket No. 1715 at 74. Notably, there is

no disclosure about how the Trust intends to monetize its most valuable assets—the insurance

coverage claims and indemnity claims against J&J. As set forth above, without the operative

documents, a holder of a Talc Personal Injury Claim cannot determine: Who will control the

trust or evaluate claims; What assets of the Trust are worth and what are the projected claims

8
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 9 of 14

against the Trust; Where claims be evaluated (i.e., through some alternative dispute mechanism

or through a judicial process); When claims are projected to be resolved and paid; How

different types of claims against the Trust will be evaluated; and Why is the proposed Imerys

Settlement fair. Inasmuch as Class 4 is the only voting class under this Plan, the key trust

documents must be provided to creditors along with a detailed description thereof.

17. In the Plan, the Debtors indicate that certain of the missing documents

above will be part of their Plan Supplement, to be filed no later than seven (7) days before the

Plan objection deadline. See Docket No. 1715 at 10. Others, such as the Trust and the TDPs, are

not part of the Plan Supplement and instead were contemplated to be part of the Plan but were

not included. Creditors, including holders of Talc Personal Injury Claims, should not be left to

guess whether the terms of those documents are prejudicial to their interests in assessing whether

to vote on a Plan that relies on those documents. Providing creditors with seven (7) days to vote

on the Plan after the Plan Supplement is woefully inadequate—because (a) after well more than a

year in bankruptcy, such a short period for review cannot be justified under any circumstances,

especially for a plan of this complexity, and (b) many creditors will not receive copies of the

Plan Supplement or will have to spend time digging around to find it.

18. The Trust Distribution Procedures and the Trust are so critical to the Plan

that the documents themselves and any proposed summary of the terms of those documents

should have been provided when the Disclosure Statement was filed. Talc Personal Injury

Claimants should have at least 28 days to review the disclosures before the Court holds a hearing

on the Disclosure Statement.

9
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 10 of 14

C. The Disclosure Statement Lacks Adequate

Information Concerning the Global Imerys Settlement

19. The Disclosure Statement also lacks meaningful disclosure of the

propriety or necessity of the “global” Imerys Settlement. In the Third Circuit, a settlement may

only be approved in the context of a plan of reorganization after consideration of a four-prong

test: “(1) the probability of success in litigation, (2) the likely difficulties in collection, (3) the

complexity of the litigation involved, and the expense, inconvenience and delay necessarily to

attending to it, and (4) the paramount interest of the creditors.” In re Exide Techs., 303 B.R. 48,

67 (Bankr. D. Del. 2003) (denying confirmation of plan because, among other grounds, the

settlement did not satisfy the four-prong test) (citing In re RFE Indus., Inc., 283 F.3d 159, 165

(3d Cir. 2002)). Indeed, it is the duty of a bankruptcy court “to determine that a proposed

compromise forming part of a reorganization plan is fair and equitable.” Id. (quoting In re

Cellular Info. Sys., Inc., 171 B.R. 926, 947-48 (Bankr. S.D.N.Y. 1994)).

20. In addition, when considering a settlement in the context of a plan of

reorganization, bankruptcy courts have also applied the following criteria:

 The balance between the likelihood of plaintiff’s or defendant’s success

should the case go to trial vis-a-vis the concrete present and future benefits
held forth by the settlement without the expense and delay of a trial and
subsequent appellate procedures.

 The prospect of complex and protracted litigation if the settlement is not

approved.

 The proportion of the class members who do not object or who

affirmatively support the proposed settlement.

 The competency and experience of counsel who support the settlement.

10
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 11 of 14

 The relative benefits to be received by individuals or groups within the

class.

 The nature and breadth of releases to be obtained by the directors and

officers as a result of a settlement.

 The extent to which the settlement is truly the product of “arms-length”

bargaining, and not of fraud or collusion.

In re Exide Techs., 303 B.R. at 67-68 (citing In re Texaco Inc., 84 B.R. 893, 902 (Bankr.

S.D.N.Y. 1988)).

21. The Disclosure Statement fails to provide adequate information

concerning the Imerys Settlement because there is absolutely no description of the claims against

Imerys S.A or any discussion of the merits of the settlement. Indeed, the Disclosure Statement

focuses solely on the mechanics of the proposed settlement and does not address any of the

required factors. Docket No. 1715 at 44-45. Given that this is the cornerstone of the Plan, the

Disclosure Statement must explain, in detail, why the proposed settlement amounts are

appropriate.

D. The Liquidation Analysis is Inadequate

22. A disclosure statement must contain a detailed liquidation analysis that

explains any assumptions made in the preparation of such analysis so that creditors can make an

informed decision about the alternatives to a debtor’s plan. See In re Crowthers McCall Pattern,

Inc., 120 B.R. 279, 300-301 (Bankr. S.D.N.Y. 1990); In re Scotio Valley Mortg. Co., 88 B.R.

168, 171 (Bankr. S.D. Ohio 1988) (denying disclosure statement approval and requiring debtor

to disclose “a more-detailed liquidation analysis, including the potential impact upon

claimholders in the event of a hypothetical Chapter 7 liquidation”).

11
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 12 of 14

23. Here, the Liquidation Analysis completely ignores any proceeds of the

claims against Imerys S.A. that are being settled under the Plan and has no discussion of the

indemnity or insurance claims. As such, it is completely deficient.

24. Until a corrected liquidation analysis addressing all of these flaws and

omissions is provided, the Disclosure Statement should not be approved.

E. The Disclosures Concerning Insurance and Indemnification Rights Are Inadequate

25. Among other deficiencies with the Disclosure Statement, various issues

relating to insurance and indemnification rights—a critical source of recovery for talc personal

injury creditors—are not addressed, including information regarding:

 the likelihood that the J&J Motion will be granted;

 the consequences to the Plan if the J&J Motion is granted;

 an assessment of the validity and value of the

indemnification claims against J&J, including an
assessment of J&J’s purported defenses to the
indemnification claims as set forth in the J&J Motion; and

 an assessment of the validity and value of the Talc

Insurance Coverage, including an assessment of the
coverage defenses that have been asserted by the carriers.

26. This information must be disclosed so that Talc Personal Injury Claimants

can determine whether the sources of recovery under the Plan are fair and reasonable. Without

disclosure on these key assets, creditors are left to guess at how and whether the indemnification

claims against J&J and the insurance assets will be monetized and how that monetization will

impact creditor recoveries under the Plan. See In re Cardinal Congregate I, 121 B.R. 760, 767

(Bankr. S.D. Ohio 1990) (“[A]n identification and discussion of all causes of action which the

12
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 13 of 14

debtor may pursue under the Bankruptcy Code or other applicable law should be included in the

Disclosure Statement. The debtor’s intentions as to these causes of action must also be

disclosed.”). None of this information is provided at a level sufficient to adequately inform the

average creditor about the Debtors’ insurance claims. The Debtors must include more detail.

Reservation of Rights

27. There are numerous other deficiencies in the Disclosure Statement. In

addition, the Arnold & Itkin Plaintiffs also have objections to confirmation of the Plan

(including, inter alia, that that Plan provides for a discharge even though it is a liquidating plan,

and that Plan does not provide for separate voting by debtor although it does not substantively

consolidate the Debtors) which they are not raising at the Disclosure Statement phase and are

reserving for Confirmation.

28. However, because the issues described above are render it fatally flawed,

the Arnold & Itkin Plaintiffs will not address any Plan objections until revised documents are

filed. Accordingly, the Arnold & Itkin Plaintiffs expressly reserve their right to supplement this

Objection at or prior to the hearing or continued hearing on the Disclosure Statement.

13
DOCS_SF:103593.5 05471/001
 Case 19-10289-LSS Doc 1847 Filed 06/15/20 Page 14 of 14

Conclusion

Based on the foregoing, the Court should deny approval of the Disclosure

Statement.

Dated: June 15, 2020 PACHULSKI STANG ZIEHL & JONES LLP

/s/ Laura Davis Jones

Laura Davis Jones (DE Bar No. 2436)
James I. Stang (CA Bar No. 94435)
Debra I. Grassgreen (CA Bar No. 169978)
John A. Morris (NY Bar No. 2405397)
Peter J. Keane (DE Bar No. 5503)
919 N. Market Street, 17th Floor
P.O. Box 8705
Wilmington, DE 19899-8705 (Courier 19801)
Telephone: (302) 652-4100
Facsimile: (302) 652-4400
Email: ljones@pszjlaw.com
jstang@pszjlaw.com
dgrassgreen@pszjlaw.com
jmorris@pszjlaw.com
pkeane@pszjlaw.com

Counsel to Arnold & Itkin LLP

14
DOCS_SF:103593.5 05471/001