pic of talc-based baby powder in hands

Appeals Court Rejects J&J’s Bankruptcy Scheme to Stop Nearly 40,000 Baby Powder Lawsuits

Johnson & Johnson’s® (JNJ.N) subsidiary LTL Management LLC is facing nearly 40,000 Baby Powder lawsuits alleging that its talc-based product caused ovarian cancer after feminine hygiene use and asbestos exposure. It will appear before a bankruptcy judge on Tuesday for the first time since a U.S. appeals court dismissed its Chapter 11 case last month.

LTL Management filed for bankruptcy in October 2021, in a strategic legal move that Johnson & Johnson said was aimed at resolving all Baby Powder® lawsuits in a “fair and efficient” manner. The company initially pledged $2 billion to the subsidiary to fund a global settlement of all Baby Powder lawsuits that a bankruptcy judge would approve.

However, the bankruptcy plan was challenged by several states, plaintiffs’ lawyers, and consumer groups, who argued that it was a sham and an abuse of the bankruptcy system. They accused Johnson & Johnson of trying to evade liability and shield its assets by transferring the Baby Powder lawsuits to a newly created entity with no business operations or assets other than the talc claims.

On Jan. 30, a three-judge panel of the Philadelphia-based 3rd U.S. Circuit Court of Appeals agreed with the challengers. It ruled that LTL Management’s bankruptcy case should be dismissed. The panel found that the subsidiary had no legitimate claim to Chapter 11 protection because it did not face financial distress and was not a viable business entity.

The panel also said that the bankruptcy plan violated the due process rights of the Baby Powder cancer plaintiffs, who would be forced to accept a settlement without having a meaningful say in the process. The panel said the plan was designed to benefit Johnson & Johnson, not the talcum powder lawsuit claimants.

Johnson & Johnson, which has a market capitalization of more than $400 billion, disagreed with the appeals court’s decision and filed a petition seeking a rehearing by the full 3rd Circuit. The company maintains that its talc products are safe and have been confirmed asbestos-free by thousands of tests.

The talcum powder lawsuits allege that Johnson & Johnson’s Baby Powder and other cosmetic products containing talc were contaminated with asbestos, a known carcinogen, and caused mesothelioma and ovarian cancer in some users.

The company said in May 2020 that it would stop selling talc-based Baby Powder in the United States and Canada. It later decided to stop selling it globally starting this year.

The bankruptcy judge, Michael Kaplan, has reviewed the appeals court’s decision and stated during a Tuesday hearing he intends to dismiss the Chapter 11 bankruptcy if the 3rd Circuit opinion does not change. He is also expected to grant a request by one of the talcum powder lawsuit plaintiffs to resume their case in California, which was put on hold by the bankruptcy filing.

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