THE WHAT? A federal appeals court in Philadelphia has rejected Johnson & Johnson’s attempts to end thousands of lawsuits regarding its talc-based products via the use of chapter 11 bankruptcy.
THE DETAILS The Third U.S. Circuit Court of Appeals dismissed the case of J&J subsidiary LTL Management LLC, which was created in 2021 in order to move its talc lawsuits to bankruptcy court and halt more than 38,000 lawsuits.
The court ruled that J&J improperly put its subsidiary into bankruptcy despite there being no financial distress. Prior to the filing, J&J had incurred costs of US$3.5 billion in verdicts and settlements.
THE WHY? The move to avoid huge lawsuit exposure has been named as the so-called Texas Two-Step bankruptcy strategy, with the ruling against J&J indicating a more stringent scrutiny of the legal tactic going forward.