Johnson & Johnson has suffered another setback in its attempt to use a bankruptcy case to limit its liability in thousands of talcum powder cancer lawsuits. This is the second time this year that a court has ruled against the company’s efforts. The plaintiffs in these lawsuits claim that Johnson & Johnson was aware of the risks associated with its talc products, including its popular baby powder, for many decades.
To protect itself from the talc litigation, Johnson & Johnson created a subsidiary called LTL Management in 2021. The company proposed that LTL, which had filed for bankruptcy, pay $8.9 billion to resolve all the claims against it. However, Judge Michael Kaplan of the U.S. Bankruptcy Court for the District of New Jersey dismissed LTL’s bankruptcy case on Friday. The judge stated that the company was not in “imminent or immediate financial distress,” which was a requirement for the bankruptcy case. The U.S. Court of Appeals for the Third Circuit in Philadelphia had also dismissed the first bankruptcy attempt earlier this year for the same reason.
Judge Kaplan expressed his opinion in his ruling, saying, “In sum, this Court smells smoke but does not see the fire.” This remark referred to LTL’s financial status and emphasized that the company did not meet the necessary criteria for filing for bankruptcy. Following this ruling, Johnson & Johnson’s shares dropped by almost 2 percent in after-hours trading.
Johnson & Johnson has stated that its subsidiary plans to appeal Judge Kaplan’s ruling. In a statement, Erik Haas, J&J’s worldwide vice president of litigation, expressed disagreement with the bankruptcy court’s conclusion. Haas argued that the substantial liability faced by LTL from the talc claims should be considered immediate financial distress. He also criticized the standard imposed by the Third Circuit, which he claimed was not in the bankruptcy code and contradicted the Supreme Court’s directives.
Despite these legal setbacks, Johnson & Johnson remains committed to resolving the talc claims. The company will continue to work with counsel representing approximately 60,000 claimants in pursuit of a resolution. Earlier this year, Johnson & Johnson ceased selling talc-based baby powder and transitioned to using cornstarch as the primary ingredient in its product. The company is well-known for its diverse range of products, which includes Band-Aids, Listerine mouthwash, vaccines, and other pharmaceuticals.
In conclusion, Johnson & Johnson’s attempt to limit its liability in talcum powder cancer lawsuits through a bankruptcy case has been rejected by a court for the second time this year. The company’s subsidiary, LTL Management, was dismissed from bankruptcy due to the lack of immediate financial distress. Johnson & Johnson will appeal this ruling, but it remains committed to resolving the talc claims and has discontinued the sale of talc-based baby powder.