J&J’s two-step Texas talc bankruptcy case returns to appeals court – Reuters


In late February, Johnson & Johnson won a controversial bankruptcy filing to settle 38,000 lawsuits accusing its talc products of causing cancer. However, it looks like the bankruptcy case is far from over, as the US Court of Appeals has now agreed to review that decision.

The dispute stems from J&J’s use of a “Texas two-step” law enforcement that allowed it to distribute its responsibilities related to ongoing talc lawsuits in a separate company. That company, known as LTL Management, later filed for bankruptcy – a move that shielded LTL (and thus J&J) from further legal action in the talc lawsuits.

Plaintiffs in the case said J&J’s rulings were a misuse of the US bankruptcy code, although J&J argued that previous companies had done the same.

The lawsuits allege that baby powder widely used by J&J and other talc products were contaminated with asbestos and caused mesothelioma and ovarian cancer.

Judge Michael Kaplan of New Jersey, where J&J is headquartered, sided with J&J in the bankruptcy case, who said at the time that J&J’s filing “for the expressed purpose of dealing present and future liabilities associated with pending worldwide personal injury claims to preserve business value is unquestionably a proper purpose under the Bankruptcy Code.

However, Kaplan later granted an expedited appeal to the case, allowing him to skip the district courts and go straight to the 3rd U.S. Circuit Court of Appeals, which has now agreed to hear the case.

J&J stopped selling its baby powder in 2020, although the megapharmacy said this was due to declining sales. The company has maintained that its signature talc products do not contain asbestos.

The pharmaceutical industry is also facing a separate lawsuit in New Jersey from the family of a former worker who alleges the company hid evidence of asbestos at a former J&J subsidiary. In that case, Kaplan ruled that J&J’s bankruptcy filing did not apply.

The Mesothelioma Claimants Committee declined to comment on the appeals update. Johnson & Johnson did not respond to a request for comment before publication.


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