Philadelphia, PA — Johnson & Johnson’s strategy to address a massive volume of talc cancer lawsuits through a subsidiary’s bankruptcy hit a roadblock when a federal appeals court upheld the dismissal of the bankruptcy filing. This ruling was a significant setback for J&J, which had created LTL Management LLC, a subsidiary, specifically to manage and potentially limit financial liabilities from tens of thousands of claims linking their baby powder and other talc-based products to cancer.
J&J had previously argued that the financial burden from the lawsuits could lead to insolvency, claiming liabilities could surpass $21 billion. However, the appellate court found these claims unconvincing and ruled that J&J had not adequately demonstrated an imminent risk of insolvency justifying a bankruptcy protection.
In the opinion written by Judge Thomas Ambro, the appellate panel noted that bankruptcy can indeed be a legitimate option for solvent companies overwhelmed by litigation, but only under circumstances where future insolvency is a realistic outcome supported by substantial evidence. This was not the case with J&J, as their scenario was deemed too speculative.
Despite the setback, Erik Haas, J&J’s worldwide vice president of litigation, announced that the company would seek a review of the decision by the U.S. Supreme Court. Haas reinforced the company’s stance that its talc-based products are safe, stating that these legal challenges do not prevent their plans to settle ovarian and other cancer claims through another bankruptcy filing of LTL Management.
The controversy extends beyond the courtroom, dividing victims and their advocates. Some victims had supported J&J’s previous efforts to establish a trust fund through bankruptcy proceedings as a viable resolution, whereas others have fiercely opposed it, arguing that it circumvents fair compensation.
J&J has reportedly increased its settlement offer in hopes of addressing claims. Following the first dismissal of an LTL Management bankruptcy, Johnson & Johnson upped their offer to $8.9 billion. However, that did not prevent another federal bankruptcy judge in New Jersey from dismissing a subsequent filing, leading to this latest appeal.
The disagreement among the affected women and other stakeholders reflects wider tensions on how large corporations handle massive litigation claims. Plaintiffs’ attorneys, like Andy Birchfield who openly opposes the bankruptcy approach, argue for more direct compensation measures. “Now is the time for J&J to change course and act as a responsible company by offering truly reasonable compensation to its customers who have suffered serious injuries,” Birchfield stated.
This ongoing legal battle not only highlights issues of corporate responsibility and ethics in dealing with product liability but also underscores the challenges in providing just compensation to large groups affected by consumer products. As J&J attempts to corral support for another bankruptcy plan, the broader implications on trust in corporate practices and consumer safety continue to unfold.