U.S. court rejects J&J bankruptcy strategy for tens of thousands of talc lawsuits

Johnson & Johnson's strategy to usage bankruptcy to resoluteness the multibillion-dollar litigation implicit claims its talc products origin crab was rejected by a national appeals tribunal connected Monday, but the healthcare conglomerate said it would situation the ruling.

The determination by the U.S. 3rd Circuit Court of Appeals successful Philadelphia removed from bankruptcy the company's LTL Management unit, which was facing much than 38,000 ineligible claims tied to products specified arsenic its Johnson's babe powder.

J&J shares were down astir 3% successful midday trading connected the New York Stock Exchange.

J&J, which maintains and reiterated connected Monday that its talc products are safe, created and spun disconnected LTL and assigned its talc liabilities to the portion and placed it successful bankruptcy successful 2021.

J&J had argued that bankruptcy provided a mode to resoluteness tens of thousands of ineligible claims much efficiently and reasonably than taking the cases to proceedings individually. The institution pledged a backing "backstop" to guarantee LTL could wage talc claimants.

The appeals tribunal said it dismissed the LTL Chapter 11 petition due to the fact that the portion was created solely to entree the bankruptcy system.

"Applied here, portion LTL faces important aboriginal talc liability, its backing backstop plainly mitigates immoderate fiscal distress foreseen connected its petition date," said the 56-page sentiment by the three-judge panel.

J&J said it volition situation the Third Circuit's ruling and proceed to question a solution of the lawsuits successful bankruptcy court.

"As we person said from the opening of this process, resolving this substance arsenic rapidly and efficiently arsenic imaginable is successful the champion interests of claimants and each stakeholders," J&J spokeswoman Allison Fennell said. "We proceed to basal down the information of Johnson's Baby Powder, which is safe, does not incorporate asbestos and does not origin cancer."

J&J utilized a restructuring strategy known arsenic the "Texas two-step" that was criticized by lawmakers and academics who argued the maneuver could supply a blueprint for different large companies to debar juries successful wide tort lawsuits.

Before the bankruptcy filing, J&J faced costs from $3.5 cardinal successful verdicts and settlements, including 1 successful which 22 women were awarded a judgement of much than $2 billion, according to bankruptcy tribunal records.

But much than 1,500 talc lawsuits person been dismissed without J&J having to wage anything, and the bulk of cases that person gone to proceedings person resulted successful defence verdicts, mistrials oregon judgments for the institution connected appeal, according to LTL's tribunal filings.

The appeals tribunal was urged to disregard the bankruptcy petition by plaintiffs suing implicit the talc products. They argued 1 of the world's largest healthcare companies should not beryllium utilizing bankruptcy to support itself from lawsuits.

The crab victims asked the appeals tribunal to overrule a New Jersey bankruptcy justice who had allowed LTL's bankruptcy to continue. LTL's bankruptcy filing automatically stopped lawsuits from proceeding against it, and U.S. Bankruptcy Judge Michael Kaplan successful Trenton, New Jersey ruled successful February that LTL's bankruptcy should besides halt talc lawsuits from proceeding against genitor institution J&J.

Kaplan said the bankruptcy tribunal is amended equipped to grip wide tort litigation than different courts.