A US appeals court has ruled against Johnson & Johnson’s use of bankruptcy to deal with mounting talc lawsuits, deciding that doing so would “create a legal blind spot.”
The Third Circuit Court of Appeals reversed a previous bankruptcy court decision on Monday, calling for the dismissal of a Chapter 11 filing by J&J’s subsidiary LTL Management.
Faced with more than 38,000 lawsuits alleging its talc-based products caused cancer, J&J spun its talc liabilities into a separate company called LTL Management back in October 2021 and filed for bankruptcy, a controversial move colloquially referred to as a “Texas two-step” bankruptcy. Claimants argued that the strategy is a misuse of the US bankruptcy code — and on Monday, a panel of judges agreed.
“For here the debtor was in no financial distress when it sought Chapter 11 protection. To ignore a parent (and grandparent) safety net shielding all liability then…
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