A federal bankruptcy judge has again halted lawsuits filed by tens of thousands of cancer victims as part of Johnson & Johnson’s latest attempt to use bankruptcy laws to settle its growing litigation liabilities.
In January 2023, Third Circuit judges dismissed J&J’s first “Texas two-step” Chapter 11 filing, allowing plaintiffs suffering from ovarian cancer, mesothelioma and other serious diseases to continue with their lawsuits. In response, J&J sought bankruptcy protection a second time for its LTL Management LLC subsidiary and proposed an $8.9 billion settlement, which is pending approval.
In an April 20 order, U.S. Bankruptcy Judge Michael Kaplan again paused legal proceedings, this time until June 15. He warned J&J that it faces “an uphill battle” as it tries to reach a resolution.
The “Texas two-step” is named for a Texas bankruptcy law that allows a profitable company to create a new company to hold liabilities, after which the new company declares bankruptcy. In 2021, J&J used this tactic to create LTL Management as a repository for its debts, and two days later, LTL filed for bankruptcy. This double-step maneuver was designed to shed the company’s legal liabilities following a flood of lawsuits as users of Johnson & Johnson products containing talc sought compensation for the severe health issues they alleged were the result of being exposed to the asbestos particles in the talc.
Before establishing LTL, Johnson & Johnson had spent almost $1 billion in its defense against talc lawsuits, according to a July 2022 Reuters report.
What Is the Johnson & Johnson Talc Case?
In 2020, after asbestos fibers were found in the iconic Johnson’s Baby Powder and other talc-based products, thousands of lawsuits emerged, with plaintiffs claiming that the use of the powder was implicated in the development of ovarian cancer and other severe diseases.
Talc often occurs naturally together with asbestos and must be carefully mined to avoid contamination with asbestos fibers, which can find their way into consumer products like baby powder.
Fibers too small to be seen with the naked eye fly into the air when asbestos is disturbed. These fibers can get trapped in the lungs and other cell tissue and cause damage that leads to severe health issues like difficulty breathing, ovarian cancer, and mesothelioma.
Asbestos is a “well-recognized” health hazard, according to the Occupational Safety and Health Administration (OSHA).
“There is no ‘safe’ level of asbestos exposure for any type of asbestos fiber,” OSHA has stated.
Although Johnson & Johnson maintains that all of its products are safe, in 2020, the company took its baby powder off store shelves in the United States and Canada due to declining sales. However, the product is still available in other countries.
What Happens Now?
Judge Kaplan’s ruling means work on roughly 40,000 pending lawsuits is paused until June15, although new lawsuits can still be filed. In the meantime, settlement negotiations among law firms representing plaintiffs continue.
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