Once again this year, Johnson and Johnson’s faced a second court ruling against its attempt to use a bankruptcy case to limit its liability in thousands of lawsuits asserting that its talcum powder products were responsible for causing cancer. According to the plaintiffs, the company was aware of the potential risks associated with its talc products, including the well-known baby powder, for several decades.
Protecting from talc-related litigation
The company established a subsidiary named LTL Management in 2021 to protect itself from talc-related litigation. The plan was for this subsidiary, which had filed for bankruptcy, to settle all the claims against it by paying $8.9 billion.
However, Judge Michael Kaplan of the U.S. Bankruptcy Court for the District of New Jersey ruled on Friday that LTL’s bankruptcy case should be dismissed, stating that the lawsuits did not put the company in immediate financial distress. This dismissal echoes an earlier decision this year when the U.S. Court of Appeals for the Third Circuit in Philadelphia rejected the initial bankruptcy effort for the same reason.
Judge Kaplan expressed in his opinion that although there are suspicions of financial troubles with LTL, there is not enough evidence to declare an immediate crisis, making Chapter 11 bankruptcy inaccessible for the company at this stage.
Following the ruling, the company’s shares experienced a drop of nearly 2 percent during after-hours trading.
Johnson and Johnson’s (J&J) responded to the ruling, stating that its subsidiary intends to appeal. Erik Haas, J&J’s worldwide vice president of litigation, expressed disagreement with the bankruptcy court’s conclusion. He argued that the substantial liability faced by LTL due to a large number of talc-related claims should be considered immediate financial distress, and he criticized the standard imposed by the Third Circuit, which he believes is not supported by the bankruptcy code or aligned with the Supreme Court’s directives.
Continue to collaborate with the attorneys
Haas assured that J&J will continue to collaborate with the attorneys representing approximately 60,000 claimants to work towards resolving the talc claims.
In response to ongoing controversies, Johnson and Johnson’s discontinued the global sale of talc-based baby powder this year, opting for cornstarch as the primary ingredient for the product instead.
Attorney Andy Birchfield stated that Johnson and Johnson’s has spent two years attempting to persuade them that a company with a value of half a trillion dollars is actually bankrupt. He called for an end to what he deemed nonsense and urged J&J to take responsibility.
In response, Johnson and Johnson’s released a statement on Friday stating its intention to pursue an appeal. The company asserted that the lawsuits filed against them are baseless and lacked scientific merit.
This marks the second time Johnson and Johnson’s has sought bankruptcy protection but has been unsuccessful. In 2021, the company’s attempt was rejected by a US appeals court, which determined that they did not prove sufficient financial distress.
Subsequently, the company filed for Chapter 22 bankruptcy protection in April of this year with the hope of resolving all claims related to cosmetic talc litigation against them and their affiliates, as previously reported by The Messenger.