Johnson & Johnson gets green light to use bankruptcy system to resolve multi-billion dollar talc lawsuit
THE WHAT? A U.S. judge has approved Johnson & Johnson’s plans to use the bankruptcy system to resolve its multi-billion lawsuit that claims its talc products cause cancer, according to Reuters.
THE DETAILS In October 2021, J&J filed the claims in newly created entity LTL Management LLC, which then filed for bankruptcy a few days later.
The strategy is known as Texas Two-Step – it allows companies to separate valuable assets from liabilities through a so-called split merger, according to Reuters.
The Plantiffs argued the move was an abuse of the Chapter 11 system, with attorney Jon Ruckdeschel saying the decision would be appealed.
THE WHY ? The decision to use the bankruptcy strategy will allow J&J to avoid fighting more than 38,000 individual lawsuits.
Ruckdeschel said of the decision: “The bankruptcy code was never intended to be abused in this way by massively profitable corporations as a means of delaying or preventing cancer victims from having their day ahead. courts.”
While some plaintiffs said it could open the floodgates for other companies facing mass litigation, Judge Kaplan said: “There is nothing to be feared in the migration of tort litigation out of the system of the tort liability to the bankruptcy system.”
He went on to say that âperhaps the doors should indeed be open.â