Image above from J&J website.
Johnson & Johnson (J&J) cannot use a bankruptcy filing to get around some 40,000 lawsuits seeking damages over the firm’s inclusion of talcum in its-Johnson’s baby powder and other products, a U.S. appeals court ruled Monday afternoon.
J&J had set up and spun off a new subsidiary, LTL Management, to deal with the lawsuits, with LTL then filing for bankruptcy protection.
The firm, which faces billions of dollars in damages from the lawsuit, had argued that the bankruptcy filing was aimed at compensating claimants fairly and equitably, Reuters reported.
The judge rejected that argument, ruling that “Given Chapter 11’s ability to redefine fundamental rights of third parties, only those facing financial distress can call on bankruptcy’s tools to do so,” according to The New York Times.
The tactic J&J used is known as the “Texas Two-Step,” since it stems from a 1989 law in that state permitting the end-around ploy.
J&J said it would appeal the judge’s decision.
The Nachawati Law Group, which represents numerous women who blame their ovarian cancer on years of using Johnson's Baby Powder, praised the ruling, with its founder Majed Nachawati noting in a press release, “Our clients are grateful that the appellate court saw through this cynical attempt by J&J to avoid responsibility.... We will press forward to ensure that jury trials resume, and these women can have the opportunity for justice they deserve"
J&J continued to affirm the safety of Johnson’s Baby Powder after the ruling, with a statement noting that product is “safe, does not contain asbestos and does not cause cancer.” The company did, however, stop selling baby powder made from talc in North America two years ago and, this summer said it would stop selling the product worldwide in favor of a cornstarch-based powder.
With its LTL subsidiary now out of the baby powder picture, the days ahead will tell if another J&J spinoff -- the upcoming Kenvue, the new name of Johnson & Johnson Consumer Health Products -- will now take on the baby powder lawsuit burden. Johnson’s Baby Powder, or whatever the brand will soon be called, falls under its purview.
Kenvue did mention non-North-American talc-related litigation as a risk factor in its recent IPO, reported Fierce Pharma, which noted at the time that the U.S. lawsuits would remain part of J&J through its LTL subsidiary.