Johnson & Johnson’s Talc Bankruptcy Plan Approved
Much to the ire of plaintiff attorneys across the country, a federal judge in New Jersey granted approval for Johnson & Johnson to move forward with its controversial bankruptcy plan involving thousands of talc-related lawsuits.
This strategy will allow Johnson & Johnson to split its assets from its liabilities, putting more than 38,000 asbestos legal claims on a newly created entity called LTL Management LLC, which filed for Chapter 11 bankruptcy protection.
The lawsuits center around asbestos-contaminated talc and include those for mesothelioma cancer. The majority involve ovarian cancer.
United States Bankruptcy Judge Michael B. Kaplan approved the plan Feb. 25, rejecting an appeal by a committee of personal injury attorneys who had asked the court to disallow the filing of the J&J subsidiary.
“We disagree with the court’s decisions,” said a spokesperson for the mesothelioma claimants committee, which was part of the bankruptcy objection argument in New Jersey. “We remain concerned that victims have been forced into bankruptcy while J&J has been shielded from answering for their independent and separate talc products liability.”
Johnson & Johnson Will Save Billions
Kaplan rejected the argument of the plaintiffs, allowing J&J to avoid a much more costly and drawn-out route of litigating individual lawsuits. He said bankruptcy offers a faster and fairer alternative.
“This Chapter 11 is being used, not to escape liability, but to bring about accountability and certainty,” Kaplan wrote. “There is nothing to fear in the migration of tort litigation out of the tort system and into the bankruptcy system.”
Officials from Johnson & Johnson testified in court that they first explored this bankruptcy strategy seriously in June 2021 after the U.S. Supreme Court refused to review a $2.1 billion judgement in Missouri for 20 women who claimed their ovarian cancer had been caused by J&J’s talc products.
Johnson & Johnson is one of America’s richest companies, with a market share of more than $450 billion. Jury verdicts and settlements already have cost J&J an estimated $4.5 billion, but the initial bankruptcy filing in October halted talc lawsuits in federal and state courts.
By comparison, the newly created subsidiary, LTL Management LLC, listed its worth at $10 billion, along with $10 billion in liabilities, according to court documents.
Johnson & Johnson is expected to save billions of dollars long term. Its stock closed Friday – the day Kaplan announced his decision – up 5%, its biggest one-day gain since spring 2020.
“I am surprised and disappointed that Judge Kaplan is allowing their bankruptcy to go forward,” Daniel Wasserberg, a New York City attorney who specializes in talc litigation, told The Mesothelioma Center at Asbestos.com. “When one of the richest companies on Earth is allowed to shed its liabilities by throwing them into a judicially sanctioned dumpster, there can be no justice for the people they killed or their loved ones.”
Recent Court Ruling Was Unexpected
Kaplan’s ruling was somewhat surprising, based on his position as a U.S. bankruptcy judge for the District of New Jersey.
The hearing was originally scheduled for North Carolina, a jurisdiction considered more favorable to this bankruptcy strategy, which was why LTL Management was opened there. A federal judge, though, said he was “obligated” to have the case heard in New Jersey where J&J is headquartered. It is a district considered less favorable to bankruptcy filings, according to past cases.
When the move was announced, attorneys throughout the country with cases against J&J applauded the move to New Jersey, expecting the petition for bankruptcy protection to be denied.
Bankruptcy Strategy Could Be Blueprint for Other Companies
J&J has continued to insist its talc products are safe, but it has stopped selling many of them in the U.S. and Canada as the number of injury lawsuits grew. J&J attributed the stoppage to misinformation.
Details of the bankruptcy filing will continue to be negotiated. Johnson & Johnson said it has set aside $2 billion to settle talc claims, but that number could change considerably in the coming weeks.
The bankruptcy filing is expected to pressure claimants to accept lower settlements than they would have before and avoid any excessive payouts.
“It’s very disappointing when huge corporations with massive profits can abuse the bankruptcy system to avoid liability for harming Americans with dangerous products like asbestos,” said attorney Joe Lahav, on-site legal advisor at The Mesothelioma Center. “All this latest decision does is allow corporate fat cats to keep even more money in their pockets and out of the hands of the innocent people they’ve harmed.”
Attorneys worry now that this latest ruling could become a blueprint for profitable companies in the future to benefit from Chapter 11 and protect valuable business assets.