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Women suing J&J speak out after company’s failed legal maneuver

  • March 7, 2023

In the long legal fight over allegations that talc in Johnson & Johnson baby powder is linked to ovarian cancer, plaintiffs got an incremental victory on Monday: A federal appeals court rejected J&J’s effort to move more than 38,000 lawsuits to bankruptcy court.

Plaintiff Deborah Smith’s case was held up for 15 months because of the attempted maneuver, a legal strategy colloquially known as the Texas Two-Step. J&J’s approach relied on the creation of a subsidiary called LTL Management that could take on the liability for talc-related legal claims. Within days of its creation in 2021, LTL filed for Chapter 11 bankruptcy.

By that time, more than two years had passed since Smith filed her suit. The news of the Two-Step, she said, felt like “a slap in the face.”

“If that was someone in their family, would they drag it out like that?” Smith said. “It’s almost like they’re playing a waiting game to see how many people will just die or just give up fighting.”

Smith was diagnosed with ovarian cancer in 2003, she said, after her doctor discovered a tumor during a procedure to remove a uterine fibroid. She had two surgeries and three cycles of chemotherapy, she added, leading her hair to fall out in bunches. It never grew back properly, so Smith said she still wears wigs.

According to Smith’s suit, she used J&J’s baby powder as a feminine hygiene product to absorb sweat and keep her skin dry for more than 15 years. The suit says Smith also used Shower to Shower, a talc-based product formerly manufactured by J&J, until 2003. 

Smith’s lawsuit cites more than 25 published studies dating back to 1982 that evaluate a link between talc and ovarian cancer risk. The suit alleges that nearly all those studies document a

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In Momentous Win For Plaintiffs, Third Circuit Dismisses J&J Talc Bankruptcy

  • March 5, 2023

In a big win for plaintiffs suing over Johnson & Johnson’s baby powder, an appeals court dismissed a Chapter 11 talc case that had halted trials across the country.

On Monday, the U.S. Court of Appeals for the Third Circuit found that the subsidiary, LTL Management, which had a $61 billion funding agreement with Johnson & Johnson, was not in financial distress when it filed for bankruptcy in 2021. The ruling reverses a Feb. 25 decision by U.S. Bankruptcy Chief Judge Michael Kaplan of the District of New Jersey.

Federal Judge Thomas Ambro of the U.S. Third Circuit. Federal Judge Thomas Ambro of the Third Circuit.

“Good intentions—such as to protect the J&J brand or comprehensively resolve litigation—do not suffice alone,” Judge Thomas Ambro wrote in the unanimous opinion. “What counts to access the bankruptcy code’s safe harbor is to meet its intended purposes. Only a putative debtor in financial distress can do so. LTL was not.”

The ruling is a big win for plaintiffs alleging in nearly 40,000 talcum powder cases that Johnson & Johnson’s baby powder caused ovarian cancer or mesothelioma.

“The doors to the courthouse, which had been slammed shut by J&J’s cynical legal strategy, are once again open, as they should be,” wrote Leigh O’Dell, a partner at Montgomery, Alabama’s Beasley Allen who is co-lead plaintiffs counsel in the talc multidistrict litigation. “Given that, we will immediately seek to return these cases to their rightful venues in federal and state district courts, efficiently schedule and conduct trials, and establish the liability of Johnson & Johnson for the deaths and disease suffered by thousands of women.”

Chris Placitella of Cohen, Placitella & Roth in Red Bank, New Jersey, is liaison counsel in talc multidistrict litigation and represents mesothelioma clients. Placitella said he expected filing new complaints immediately, saying, “it’s over.”

“With all due respect to

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J&J’s Talc Bankruptcy Case Gets Tossed by Appeals Court (1)

  • March 2, 2023

Johnson & Johnson can’t use bankruptcy to resolve more than 40,000 US cancer lawsuits over its now-withdrawn baby powder, a federal appeals court ruled.

The three-judge panel in Philadelphia sided with cancer victims, who argued J&J wrongly put its specially created unit, LTL Management, under court protection to block juries around the country from hearing the lawsuits and handing out damage awards.

The ruling means J&J will most likely need to defend itself against claims that tainted talc in its baby powder causes cancer. The company has lost a number of such cases — including one that was appealed all the way to the US Supreme Court, before J&J was forced to pay more than $2 billion to one group of victims.

Shares of J&J dropped as much as 7.2% in New York on Monday before closing down 3.7%. J&J removed its iconic talc-based baby powder from the US market in 2020 and is slated to have it off markets across the globe by the end of this year.

The judges found only companies directly threatened with financial troubles can use bankruptcy. Since J&J itself never claimed to be in immediate danger, it can’t benefit from Chapter 11 of the bankruptcy code by putting a unit under court protection, the judges found.

“Good intentions — such as to protect the J&J brand or comprehensively resolve litigation — do not suffice alone,” to file for bankruptcy, Judge Thomas Ambro wrote. “What counts to access the Bankruptcy Code’s safe harbor is to meet its intended purposes. Only a putative debtor in financial distress can do so. LTL was not. Thus we dismiss its petition.”

The ruling may drive a settlement, according to Holly Froum, a litigation analyst for Bloomberg Intelligence. A settlement of the more-than 40,000 suits

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Must be broke, court says

  • February 21, 2023
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Johnson & Johnson’s baby powder. Photo: Justin Sullivan/Getty Images

You have to actually be broke to file for bankruptcy protection — at least that’s what a federal appellate court ruled Monday.

Driving the news: The court dismissed the bankruptcy filing by a subsidiary of corporate giant Johnson & Johnson. J&J created the unit — dubbed LTL Management — for the express purpose of holding legal liabilities and then filing for Chapter 11.

Why it matters: The ruling undercuts the emerging corporate strategy of using bankruptcy to excise costly liabilities when the organization itself is perfectly solvent.

  • “Because LTL was not in financial distress, it cannot show its petition served a valid bankruptcy purpose and was filed in good faith,” a three-judge panel said in its unanimous ruling.

Catch up quick: J&J faces some 38,000 lawsuits from people and their survivors claiming that the company’s talc-based powder caused cancer. J&J has repeatedly denied the allegation.

  • Critics say that transferring the litigation claims to the new subsidiary and placing that unit in bankruptcy was a tactic to cap J&J’s exposure to the liabilities.

State of play: At the time it put newly formed subsidiary LTL Management into bankruptcy in October 2021, J&J had an equity value of more than $400 billion, a AAA credit rating, and $31 billion in cash and marketable securities.

  • That means it almost surely had ample liquidity to pay LTL’s obligations — and can’t instead use the bankruptcy process, the court ruled. When LTL filed for bankruptcy, J&J was worth at least 25 times more than its estimated total product liabilities over
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