A federal appeals court has blocked a controversial legal strategy devised by Johnson & Johnson to avoid being hit with massive payouts for thousands of talcum powder cancer claims. The strategy involved transferring all liability for the talcum powder claims to a newly created subsidiary and immediately putting that subsidiary into bankruptcy. In a decision issued on January 30, 2023, the U.S. Court of Appeals for the Third Circuit removed J&J’s LTL Management subsidiary from bankruptcy, stating that the subsidiary faces no financial distress and therefore does not qualify for Chapter 11 bankruptcy. If you or someone you love has been diagnosed with ovarian cancer, mesothelioma, or another type of cancer you believe may have been caused by exposure to Johnson & Johnson’s talcum-based baby powder products, contact Consumer Safety Watch today to find out how we can help.
Johnson & Johnson, once the most trusted brand in America, has faced significant scrutiny in recent years in light of claims that its signature talcum powder products cause cancer. The company faces more than 38,000 product liability lawsuits filed by plaintiffs across the country who say they developed ovarian cancer or mesothelioma allegedly caused by Johnson & Johnson’s Baby Powder and Shower-to-Shower powder products. The legal claims against Johnson & Johnson all involve similar allegations that the manufacturer failed to provide users with adequate warnings about the potential health risks associated with exposure to asbestos in its talc-based products.
In February 2022, faced with mounting liability costs associated with thousands of talcum powder cancer claims, Johnson & Johnson created a separate entity called LTL Management, LLC, to which all of J&J’s liabilities relating to the growing talc litigation were transferred. Two days later, LTL Management filed a Chapter 11 bankruptcy petition in the Western District of North Carolina. The goal of this controversial move, as stated in the appeals court opinion, was to “isolate the talc liabilities in a new subsidiary so that entity could file for Chapter 11 [bankruptcy] without subjecting [Johnson & Johnson’s] entire operating enterprise to bankruptcy proceedings.” In doing so, the manufacturer planned to force thousands of talcum powder cancer claims through the bankruptcy process, which would have severely limited the amount of damages plaintiffs would have been able to recover.
Over the course of the talcum powder litigation, plaintiffs have won massive jury verdicts against Johnson & Johnson, including one case where J&J was ordered to pay $4.69 billion to 22 ovarian cancer plaintiffs, a verdict that was later reduced to $2.24 billion on appeal. The U.S. Court of Appeals for the Third Circuit stated in its recent ruling that the company faces liability for what could amount to billions of dollars in judgments stemming from its talcum powder products. However, a mere desire “to protect the J&J brand or comprehensively resolve litigation” does not meet the financial distress requirements for filing Chapter 11 bankruptcy. “What counts to access the Bankruptcy Code’s safe harbor is to meet its intended purposes. Only a putative debtor in financial distress can do so,” the opinion states. “LTL was not. Thus we dismiss its petition.”
Johnson & Johnson has one more chance to try to go through with the bankruptcy proceeding and reduce its liability for talcum powder cancer claims – an appeal to the U.S. Supreme Court. If the Supreme Court refuses to take up the case, however, the bankruptcy stay on litigation will be lifted, the talcum powder cancer lawsuits pending against Johnson & Johnson will continue, and thousands more lawsuits will likely be brought against the company in the years to come. In fact, the appeals court noted in its opinion that the cost of talcum powder payouts will likely reach $2.4 billion over the next two years.
J&J isn’t the only company to face criticism recently for attempting to use the U.S. bankruptcy system to avoid liability for injury claims. 3M employed a similar scheme to protect the company against thousands of Combat Arms earplug lawsuits filed by U.S. veterans who suffered hearing loss, tinnitus, and other irreversible hearing problems due to the earplugs’ faulty design. If you have been diagnosed with ovarian cancer, mesothelioma, or another type of cancer allegedly caused by Johnson & Johnson’s talcum powder, do not hesitate to discuss your legal rights with an experienced talcum powder cancer attorney. Call Consumer Safety Watch today to find out if you may be eligible to join the growing talcum powder litigation.