Business

US court rejects J&J’s bankruptcy strategy because of tens of thousands of talc lawsuits


Bottles of Johnson & Johnson baby powder line the shelves of a drugstore in New York.

Lucas Jackson | Reuters

Johnson & JohnsonThe strategy of using bankruptcy to settle a multibillion-dollar lawsuit over claims its talc products cause cancer was dismissed by a federal appeals court on Monday, but the healthcare conglomerate The health department said it would object to the ruling.

The decision by the US Third Circuit Court of Appeals in Philadelphia removed the company’s LTL Management unit from bankruptcy, which is facing more than 38,000 legal complaints related to products such as baby talcum powder. Johnson’s brother.

Shares of J&J fell about 3% in midday trading on the New York Stock Exchange.

J&J, the company maintains and reiterated on Monday that its talc products are safe, created and separated from LTL, and assigns talc liabilities to this unit and gives it into bankruptcy in 2021.

J&J has argued that bankruptcy provides a more efficient and fair way to resolve tens of thousands of legal claims than going to separate trials. The company has pledged “backstop” funding to ensure LTL can pay talc claimants.

The Court of Appeals said it dismissed the LTL Chapter 11 lawsuit because it was created solely to access the bankruptcy system.

“Applicable here, while LTL faces substantial liability in the future, its financial backing will clearly mitigate any expected financial hardship on the date of the lawsuit. ,” said the 56-page opinion of the three-judge panel.

J&J said it will challenge the Third Court ruling and continue to seek to settle the cases in bankruptcy court.

J&J spokeswoman Allison Fennell said: “As we have said at the beginning of this process, it is in the best interests of the claimants and all of us to resolve this matter as quickly and efficiently as possible. all parties involved”. “We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, asbestos-free and non-carcinogenic.”

J&J used a restructuring strategy known as “Two-Step Texas” that has been criticized by lawmakers and academics, who say the strategy can provide a blueprint for companies. large to avoid juries in major wrongdoing cases.

Prior to filing for bankruptcy, J&J faced $3.5 billion in costs of judgments and settlements, including one in which 22 women were awarded judgments worth more than $2 billion. , according to bankruptcy court filings.

But more than 1,500 talc lawsuits were dismissed without J&J having to pay anything, and the vast majority of cases that go to trial result in a plea, mistrial, or judgment for the company. on appeal, according to LTL court records.

The Court of Appeal was asked to dismiss the bankruptcy petitions filed by plaintiffs suing talcum powder products. They argue that one of the world’s largest healthcare companies should not use bankruptcy to protect itself from lawsuits.

Cancer victims have asked the appeals court to overturn the ruling of a New Jersey bankruptcy judge who allowed LTL to go ahead with bankruptcy. LTL’s bankruptcy filing automatically prevented lawsuits against it, and U.S. Bankruptcy Judge Michael Kaplan of Trenton, New Jersey ruled in February that LTL’s bankruptcy would also prevent talc lawsuits against parent company J&J.

Kaplan says the bankruptcy court is better equipped to handle mass litigation than other courts.

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