Johnson & Johnson (J&J) on Thursday put into bankruptcy tens of thousands of legal claims alleging its Baby Powder and other talc-based products caused cancer, offloading the potential liabilities into a newly created subsidiary.
J&J put the talc claims into an entity called LTL Management LLC, which filed for bankruptcy protection on Thursday in North Carolina, according to the company and court records. J&J and its affiliates were not part of the bankruptcy filing.
Tens of thousands of plaintiffs have alleged J&J’s Baby Powder and other talc products contained asbestos and caused cancer, which the company denies. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.
J&J executed Thursday’s corporate reshuffling through a contentious legal maneuver known as a Texas two-step bankruptcy, a strategy other companies facing asbestos litigation have used.
In that process, a J&J business split in two through a so-called divisional merger under Texas law. That transaction created LTL, the new entity saddled with J&J’s talc liabilities, according to court papers filed Thursday.
J&J, with a market value exceeding $400 billion, said the talc cases would be halted while LTL navigates bankruptcy proceedings.
The company’s costs defending nearly 40,000 cases have approached $1 billion, according to bankruptcy-court filings Thursday. Settlements and verdicts have cost J&J about $3.5 billion more.
“We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases,” J&J General Counsel Michael Ullmann said in a statement.
“While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the (company) and all stakeholders,” Ullmann added.
Plaintiffs’ lawyers decried the bankruptcy filing. J&J’s “bankruptcy gimmick is as despicable as it is brazen” and “an unconscionable abuse of the legal system,” said Linda Lipsen, chief executive of the American Association for Justice, a trial lawyers’ group, in a statement.
High-Stakes Litigation
Reuters first reported in July that J&J was exploring offloading its talc liabilities and placing them into bankruptcy.Thursday’s move shifted high-stakes litigation over the safety of J&J’s talc from courtrooms across the United States to one legal proceeding before a federal bankruptcy judge who could potentially force a settlement among the blue-chip company and plaintiffs.
During earlier settlement discussions, a J&J attorney told plaintiffs’ lawyers that the company could pursue the bankruptcy plan, which might result in lower payouts for cases that do not settle beforehand, Reuters previously reported.
In the weeks leading up to Thursday’s bankruptcy filing, lawyers representing women with cancer claims asked multiple judges to forbid J&J from executing such a maneuver, only to be turned down.
The company maintained in statements and in court proceedings over the summer that it had not decided whether to pursue the maneuver.
A 2018 Reuters investigation found J&J knew for decades that asbestos, a known carcinogen, lurked in its Baby Powder and other cosmetic talc products. The company stopped selling Baby Powder in the United States and Canada in May 2020, in part due to what it called “misinformation” and “unfounded allegations” about the talc-based product.
J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.
In bankruptcy-court papers, lawyers for the newly created J&J subsidiary said the Chapter 11 filing was “necessitated by an unrelenting assault by the plaintiff trial bar, premised on the false allegations that the ... talc products contain asbestos and cause cancer.”
In June, the Supreme Court declined to hear J&J’s appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company’s talc caused their ovarian cancer.
J&J has prevailed in other recent talc cases.
