Federal Appeals Court Rejects Johnson & Johnson’s Bankruptcy Strategy for Baby Powder Lawsuits
On January 30, a critical decision for Johnson & Johnson and thousands of people with cancer was handed down by the 3rd Circuit Court of Appeals in Philadelphia when a three-judge panel ruled that LTL Management, a Johnson & Johnson subsidiary, could not file bankruptcy.
The Court dismissed LTL Management’s Chapter 11 petition, and in the 56-page opinion, they explained the dismissal was due to the fact LTL Management was created only to access the bankruptcy system.
“Applied here, while LTL faces substantial future talc liability, its funding backstop plainly mitigates any financial distress foreseen on its petition date,” it said.
Johnson & Johnson lawyers had been aiming for a different outcome by using a legal maneuver dubbed the “Texas Two-Step.’’
When Johnson & Johnson created LTL Management in 2021, they were facing talc baby powder lawsuits. People allege Johnson & Johnson’s talc baby powder caused them to become gravely ill due to the product being tainted with asbestos, a well-known carcinogen.
The Texas Two-Step maneuvering came about when officials for the conglomerate formed LTL Management last March and transferred the baby powder legal liabilities under its umbrella. LTL Management was then moved to North Carolina and declared Chapter 11 protection. At that time, a bankruptcy judge gave the green light to LTL Management to move forward with bankruptcy, and the baby powder lawsuits were put on hold. An appeal by claimants against Johnson & Johnson quickly followed this.
While those that appealed are now celebrating the court’s recent decision, there is no doubt other powerful companies, including Purdue Pharma, are observing the bankruptcy case. Several federal judges are currently reviewing Purdue Pharma’s bankruptcy negotiation that would make it so the company’s founding family, the Sacklers (who are not bankrupt), would participate in a settlement, paying $ 6 billion into a fund for victims of the opioid crisis. In exchange, they would receive immunity from all lawsuits linked to their private company’s sales of opioids, including OxyContin.
Toxic History of Johnson & Johnson Talc Baby Powder
The well-known Johnson Baby Powder product has been sold with talc as a primary ingredient for 50 years. Although in North America, since 2020, the company has not used talc in the product, instead only selling baby powder with cornstarch.
According to the American Cancer Society, talc, collected from mines containing asbestos, is a carcinogen linked to several cancers – ovarian cancer, lung cancer, uterine cancer, stomach cancer, and pleural mesothelioma.
By 2019, after word had spread through different media reports that leaders at Johnson & Johnson knew of the asbestos in the talc baby powder for more than 40 years but continued to market and sell the baby powder anyway, droves of people with cancer sought legal action against the company.
More than 38,000 lawsuits have been filed alleging Johnson & Johnson attributed to claimants’ cancer since they knew the hazards associated with the baby powder.
As mentioned, Johnson & Johnson stopped selling baby powder with talc in the United States in 2020. However, it was not until recently that the company said it would discontinue the distribution of talc-based baby powder in other parts of the world.
The LTL Management bankruptcy case is expected to be dismissed, but the ruling is on hold while Johnson & Johnson appeals.