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 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.”
Current and former U.S. military members suing 3M over allegedly defective military earplugs have asked a U.S. judge to dismiss 3M subsidiary Aearo Technologies’ bankruptcy, accusing the company of using bankruptcy to shield itself from litigation, which has grown into the largest mass tort in U.S. history.
The servicemembers’ group said late on Thursday that Aearo’s Chapter 11 bankruptcy should face the same fate as the bankruptcy of a Johnson & Johnson-created subsidiary, which was used to settle lawsuits alleging J&J baby powder and other talc products caused cancer. A federal appeals court dismissed the bankruptcy strategy this week.
3M Co faces more than 230,000 lawsuits accusing it of selling defective earplugs that caused hearing loss for U.S. military members. The company has sought to settle those lawsuits through Aearo’s bankruptcy.
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3M’s plan faltered when U.S. Bankruptcy Judge Jeffrey Graham in Indianapolis ruled that Aearo’s bankruptcy did not stop earplug lawsuits from proceeding against parent company 3M, which is not bankrupt. 3M is appealing that ruling.
Now the servicemembers suing want Graham to go a step further and end Aearo’s bankruptcy entirely. In a Thursday court filing, they cited a Monday ruling by the U.S. 3rd Circuit Court of Appeals in Philadelphia dismissing a bankruptcy case filed by J&J subsidiary LTL Management because neither J&J nor LTL were in “financial distress.”
J&J denies the cancer claims and is challenging the 3rd Circuit ruling.
defective earplugs have requested a judge dismiss a company subsidiary’s bankruptcy claim.”/
U.S. military personnel suing 3M for allegedly defective earplugs have requested a judge dismiss a company subsidiary’s bankruptcy claim.(REUTERS/Nicholas Pfosi/File Photo)
LTL, like Aearo, entered bankruptcy with an agreement that its non-bankrupt parent would fund a settlement of the lawsuits in bankruptcy.
Feb 2 (Reuters) – When a U.S. appeals court ruled on Monday that Johnson & Johnson can’t use the U.S. bankruptcy system to offload vast litigation exposure from product liability claims, the people who reacted most quickly were undoubtedly J&J investors.
Within hours of the 3rd U.S. Circuit Court of Appeals decision, investors drove J&J’s share price down by nearly 4% — its biggest one-day decline in years.
But another, albeit much smaller, group of people was also roiled by Monday’s ruling from the 3rd Circuit: appellate lawyers who were finishing up friend-of-the-court briefs due on Wednesday in a 7th Circuit appeal by 3M Co that presents issues similar to those in the J&J case.
The lawyers’ quick response to the 3rd Circuit’s ruling – redrafting sections of their briefs to add quotations and references to the J&J decision – shows the deep significance of these cases for both plaintiffs and corporate defendants ensnared in mass tort litigation. If your appellate brief addresses an issue that could affect hundreds of thousands of people, it’s worth rushing to beat a deadline.
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The 3M and J&J appeals aren’t exactly the same, but both involve the big-picture question of whether corporations facing an onslaught of lawsuits can use the U.S. Bankruptcy Code to halt litigation and push for a global resolution via the Chapter 11 process.
At the 7th Circuit, 3M is appealing a bankruptcy judge’s ruling that tens of thousands of military veterans who allege hearing loss from 3M earplugs can continue litigating against the parent company, despite the Chapter 11 bankruptcy of the 3M subsidiary that originally made the earplugs. Like J&J, 3M shifted litigation liability to the subsidiary, Aearo Technologies, but also provided the bankrupt entity with an uncapped financial
defective earplugs have requested a judge dismiss a company subsidiary’s bankruptcy claim.”/
Federal Judge Thomas Ambro of the Third Circuit.