US Court Rejects Johnson & Johnson's Controversial Ploy To Evade Talc Cancer Lawsuits

A federal appeals court in Philadelphia rejected Johnson & Johnson's JNJ use of chapter 11 bankruptcy to offload several lawsuits over its talc products, alleging its talc products caused cancer.
In 2021, J&J transferred the lawsuits and jury verdicts to a shell company known as LTL Management.
Using a Texas law known as the "Texas Two-Step," LTL briefly incorporated in Texas before filing for bankruptcy.
The move sparked controversy because – if successful – it would have allowed a profitable corporation to use bankruptcy law to avoid accountability in the civil justice system.
The court ruled that the company improperly placed its subsidiary into bankruptcy even though it faced no financial distress.
J&J's two-step sought to halt more than 38,000 lawsuits, and the ruling now revives those lawsuits.
The appellate ruling found that LTL is "highly solvent" and not entitled to file Chapter 11 bankruptcy because J&J had provided it with a $60 billion funding "safety net" to meet its talc liabilities.
With thousands of lawsuits to resume, the trial lawyer said J&J's liability could exceed the $60 billion it had set aside for the LTL bankruptcy.
In August, New Mexico and Mississippi sought to take their cases to trial in their respective state courts. However, 40 US states and the District of Columbia were in talks with the LTL subsidiary for a potential settlement of consumer protection claims.
Price Action: JNJ shares are down 0.30% at $161.15 premarket on the last check Tuesday.

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