Johnson & Johnson’s attempts to move past its expensive legal battles over talc-based baby powder remain unsuccessful, even after utilizing a loophole known as the “Texas Two-Step.”
Company executives say the steady stream of new claims won’t pressure them into giving up.
Over the last several years, thousands of plaintiffs who were diagnosed with cancer after using J&J’s famous baby powder filed baby powder lawsuits against the powerhouse company, alleging that the powder’s main ingredient for 50 years, talc, was contaminated with asbestos, a known carcinogen.
The plaintiffs, primarily women who contracted ovarian cancer or mesothelioma, also contend that J&J knew of this contamination and sold the product anyway without disclosing risks to consumers.
Although Johnson & Johnson replaced talc with a new cornstarch-based formula and is removing all talc products from stores nationwide, company officials continue to deny any wrongdoing. They claimed the ingredient swap was due to poor sales.
The Texas Two-Step Strategy
In 2021, J&J officials employed a legal maneuver known as the Texas Two-Step to avoid the talc baby powder lawsuits they faced at the time. They created an LLC called LTL Management in Texas, a state that allows a corporation to divide into two. They then shifted the lawsuits into the new entity and relocated it to North Carolina, where it qualified for bankruptcy protection and a subsequent freeze on the lawsuits.
But in January 2023, the Third U.S. Circuit Court of Appeals in Philadelphia dismissed the bankruptcy filing, stating that LTL Management was not in financial distress and had only been created to access the bankruptcy system.
Undeterred by the rejection, LTL Management relocated again, this time to New Jersey – a state in the same jurisdiction where the 3rd Circuit resides. This time, the entity’s management stated their intention to refile for Chapter 11 protection with a reorganization plan containing the new proposed $8.9 billion settlement.
That second attempt was dismissed in July by a New Jersey U.S. Bankruptcy Judge, Michael Kaplan, who also ruled that the talc lawsuits did not put LTL into immediate “financial distress.”
Surge in Baby Powder Claims and Possible Third Bankruptcy Attempt
For Johnson & Johnson’s leaders and shareholders alike, only one thing is certain: the once-beloved household name is ostensibly drowning in litigation, with no end in sight.
The company has seen a surge of more than 25 percent in baby powder lawsuits since its second bankruptcy attempt failed. A February securities filing revealed a total of 40,300 filed cases; 11,000 more were added after Judge Kaplan’s ruling, bringing the total number of claims to over 50,000 – not counting those filed in state courts.
According to a report by Bloomberg, J&J’s legal team alluded to a possible third bankruptcy filing during an October investment call.
Erik Haas, Johnson & Johnson’s lawyer in charge of litigation, said the company will continue to “vigorously defend itself’’ in cases that go to trial. He added that a third bankruptcy attempt would be in pursuit of a “consensual resolution of the talc claims.”
Even if the third bankruptcy was approved, said the report, J&J would need the support of 75 percent of its claimants to proceed – which could prove difficult.
Filing a Baby Powder Lawsuit
The failure of a second bankruptcy attempt has strengthened the power of talc baby powder victims wishing to take legal action against Johnson & Johnson. If you have ovarian cancer or mesothelioma and have used talc-based baby powder, you should consider consulting a baby powder lawyer. A successful lawsuit can give you and your family the financial compensation you deserve while helping others by holding a global corporation accountable for its actions.
Qualifying for a baby powder lawsuit depends on several factors, including the severity of the claimant’s condition and the strength of the evidence. Hiring an experienced baby powder lawyer is the best way to achieve a positive outcome.