Johnson & Johnson is defending talc bankruptcy in court

Feb 14 (Reuters) – Johnson & Johnson (JNJ.N) The subsidiary on Monday began a courtroom battle aimed at using the bankruptcy process to resolve tens of thousands of allegations that the company’s baby powder and other talc-based products caused cancer.

More than 38,000 plaintiffs have claimed that the company’s talc products caused ovarian cancer and mesothelioma, a potentially fatal cancer linked to asbestos exposure. J&J assures that consumer talc products are safe and have been confirmed to be free of asbestos through thousands of tests.

The company in October placed talc claims into a newly created entity called LTL Management LLC, which has filed for bankruptcy protection in North Carolina.

US Bankruptcy Judge Michael Kaplan of New Jersey, who took over the LTL case in November when it was moved from North Carolina, has set a five-day trial date to consider an attempt by the committees representing the plaintiffs to dismiss the bankruptcy case.

Lawyers for the commissions representing the plaintiffs argue that allowing an LTL bankruptcy to proceed would put an unfair limit on the payment that could be available to people who have been harmed.

“This case is corrupt at its core,” Jeffrey Jonas, an attorney for one of the plaintiffs’ panels, said during opening arguments Monday.

LTL said in court filings that bankruptcy is a legal and appropriate response to an unexpected and “potentially financially devastating” wave of lawsuits.

J&J used a legal maneuver known as “Texas Two Steps,” which allows companies to split in two through a so-called “split merger,” in which one part of the company holds valuable assets while the other is burdened with responsibilities.

This strategy, while rarely used, could be more widely adopted by larger companies facing liability if J&J gets approval in bankruptcy court, according to the plaintiffs’ attorneys at talc, as well as some legal experts. If successful, experts said, J&J could offer Corporate America a blueprint for how to circumvent jury trials involving allegations of defective products or misconduct.

J&J has proposed giving the subsidiary $2 billion to put into a trust to compensate 38,000 current and future claimants. The company said in court filings and in public statements that LTL could also benefit from a stream of equity proceeds estimated at more than $350 million at the time of the bankruptcy filing.

The plaintiffs’ attorneys wrote in December that the bankruptcy proceedings “make the death of cancer victims, even those with judgment, scratch, claw, and fight, likely to be compensated for years, out of the money that was available” before the separation of the LTL. Court papers.

“There was no attempt in this case to shirk responsibility,” LTL wrote in court papers in December. The aim of this issue is to reach a just, effective and consensual solution.

Before J&J’s split over LTL, it faced $3.5 billion in judgments and settlements, including one in which 22 women spent more than $2 billion, according to bankruptcy court records.

Talc lawsuits are on hold while J&J, which has a market capitalization of more than $446 billion, awaits the outcome of LTL’s bankruptcy proceedings.

Kaplan said he plans to decide whether or not to dismiss the bankruptcy case before the end of the month.

On February 4, Reuters reported that J&J secretly launched Project Plato last year to shift liability from about 38,000 pending lawsuits to a newly created subsidiary, which was then set to declare bankruptcy. [nL1N2UF2HM]

A 2018 Reuters investigation found that J&J has known for decades that trace amounts of asbestos are lurking in Johnson’s baby powder and other cosmetic talcum products.

The company stopped selling baby powder in the US and Canada in May 2020, due in part to what it called “misinformation” and “unfounded allegations” about the talc-containing product.

Reporting by Dietrich Knuth; Additional reporting by Tom Hales in Wilmington, Del. Editing by Nolen Walder and Bill Bercrot

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