Philadelphia, PA — In a significant legal ruling, a federal appeals court has again halted Johnson & Johnson’s controversial attempt to manage thousands of lawsuits alleging harm from its talcum-based products through a subsidiary’s bankruptcy. This decision underscores the complexity and contentious nature of corporate bankruptcy strategies involving public health claims.
Johnson & Johnson, a household name in healthcare products, utilized a subsidiary, LTL Management, to file for bankruptcy in October 2021. This move was seen as an effort to consolidate and potentially cap liabilities linked to thousands of claims suggesting that its baby powder and other talc products caused cancer. Critics labeled this legal strategy as the “Texas two-step,” a maneuver that relies on Texas law to allow a company to split into separate entities, one of which takes on the liabilities and then files for bankruptcy.
The decision from the 3rd U.S. Circuit Court of Appeals in Philadelphia marked a significant push back against Johnson & Johnson’s approach. The court ruled that LTL Management was not financially distressed in the typical sense when it filed for bankruptcy and therefore should not qualify for bankruptcy protection. This ruling aligns with the concerns voiced by numerous plaintiffs awaiting their day in court.
Legal experts note the broader implications of this ruling, emphasizing that it may set a precedent affecting how large corporations handle mass tort liabilities through bankruptcy. Consumer rights advocates have closely monitored this case, arguing that allowing such maneuvers might unfairly limit compensation for individuals suffering from serious health issues attributed to consumer products.
Johnson & Johnson has consistently denied any wrongdoing related to its talc products, citing decades of scientific analysis and regulatory approvals that underscore the safety of its products. Despite this, the company discontinued its talc-based baby powders in the U.S. and Canada in 2020, citing declining sales fueled by changing consumer habits and misinformation about product safety.
The legal journey is far from over, with appeals likely. This ongoing saga not only affects the stakeholders directly involved — namely the thousands of plaintiffs and a corporate giant — but also sets a critical legal benchmark for corporate responsibility and consumer safety.
As the case progresses, it will be important to observe how Johnson & Johnson navigates the fallout of this ruling, both in and out of the courtroom. For now, the appeals court’s decision represents a pivotal moment in the long-standing battle over talc litigation, shining a light on the legal and ethical responsibilities corporations face when public health claims are raised against their products.