J&J talc unit given green light to file for bankruptcy

By Becky Bargh | Published: 25-Feb-2022

Plaintiffs were unsuccessful in their bid to stop the personal care giant from filing for bankruptcy protection, which could result in lower payouts for talc litigation

Personal care giant Johnson & Johnson (J&J) has won its court battle to file for Chapter 11 bankruptcy.

A New Jersey judge ruled that the proceedings had been filed in good faith and a valid bankruptcy purpose, according to Law 360.

LTL Management, a newly created subsidiary of J&J to hold and manage millions of dollars worth of talc litigation against J&J, made the application for bankruptcy protection in October 2021.

The decision, however, was met with fierce opposition from claimants.

Motions were filed against J&J’s application, accusing it of trying to offload thousands of lawsuits that claim its Baby Powder talc product contained cancer-causing asbestos.

The legal move, known as a Texas two-step bankruptcy – whereby a business is split into two via a divisional merger – could result in lower payouts for plaintiffs that are not settled ahead of the filing.

J&J is currently facing 38,000 cancer lawsuits, and has always denied that its talc products have contributed to any diagnosis.

As a result, the American multinational was forced to fight through the courts for its right to file for bankruptcy.

“Let’s be clear, the filing of a Chapter 11 case with the expressed aim of addressing the present and future liabilities associated with ongoing global personal injury claims to preserve corporate value is unquestionably a proper purpose under the Bankruptcy Code,” wrote Judge Kaplan.

During the trial, J&J said that it was dealing with billions of dollars of legal costs to cope with the thousands of talc injury claims, as well as potential liabilities.

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