By Dietrich Knauth
(Reuters) – A Johnson & Johnson subsidiary is again asking a U.S. judge to pause tens of thousands of lawsuits alleging that the company’s baby powder and other talc products cause cancer, as it takes another shot at resolving the litigation in bankruptcy after a federal appeals court found its first attempt improper.
At a Tuesday hearing in Trenton, New Jersey, LTL Management will argue that the so-called “automatic stay” under bankruptcy law that stops lawsuits against it from moving forward while it is in Chapter 11 proceedings, should also protect J&J, which has a market value of over $430 billion and has not filed for bankruptcy itself.
Two groups of cancer plaintiffs and the U.S. Department of Justice’s bankruptcy watchdog, have opposed the company’s bid for a stay, arguing that it is a fraudulent attempt to evade the earlier court ruling and that the second bankruptcy has “slim to nonexistent prospects” of success.
More than 38,0000 talc lawsuits have been on hold since LTL first filed for bankruptcy in 2021, but cancer victims argue that they should be allowed to proceed with their lawsuits after a federal appeals court nixed the company’s attempt to offload the litigation in bankruptcy.
The Philadelphia-based 3rd U.S. Circuit Court of Appeals ruled in January that LTL was not eligible for bankruptcy because it was not in “financial distress.”
Before the talc lawsuits could resume, LTL filed for bankruptcy a second time, re-opening the legal battle over the bankruptcy’s legitimacy.
LTL argues that the lawsuits must be stopped because litigation against J&J would imperil its effort to negotiate a comprehensive settlement of all current and future talc claims in its bankruptcy. It has said its second bankruptcy is different from its first, because it has less funding available and more plaintiff support for a settlement.
J&J has offered $8.9 billion to settle the claims, but has not provided details about how much each claimant would receive from the deal. The company has said its baby powder and other talc products are safe and do not cause cancer.
Some plaintiffs groups have backed the company’s new bankruptcy, and J&J says that attorneys who represent 60,000 plaintiffs have agreed to support the current settlement offer.
J&J’s effort to settle its talc liabilities in bankruptcy began in October 2021. The company divided its consumer business in two and offloaded tens of thousands of talc lawsuits onto its newly created subsidiary, LTL, which almost immediately filed for Chapter 11. The goal: to halt the avalanche of lawsuits and force plaintiffs into a global settlement.
U.S. Bankruptcy Judge Michael Kaplan agreed to protect J&J from lawsuits during LTL’s first bankruptcy, saying at the time that bankruptcy offered the best way to fairly resolve all of the talc lawsuits together.
Kaplan, who is also presiding over the second bankruptcy, will now decide whether to stop the lawsuits again to give LTL a second shot at a bankruptcy settlement.
(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Bill Berkrot)
