In September, 2022 we published a piece entitled, “The Plan to Screw Talc-Cancer Victims: J&J’s Texas Two-Step to Bankruptcy” which described the multi-billion dollar corporation Johnson & Johnson’s conniving plan to get out of paying victims what the Courts in existing lawsuits awarded them in their talc-cancer cases and to block future lawsuits. Their master plan was to create a subsidiary called, “LTL Management”, move all the talc-related assets and debt to LTL, and then have LTL file bankruptcy, which would automatically stop lawsuits from proceeding against the subsidiary company LTL and against Johnson and Johnson as the parent company. In short, the strategy uses a Texas law to split an existing company in two, creating the new subsidiary meant to shoulder the lawsuits, and then have that new company file bankruptcy.****  Though done previously by other corporations, this clever maneuver in such a public case would not only harm consumers and victims, but held the potential to upend corporate law.  As the New Yorker put it, allowing such a maneuver would create a future where “the government has diminished power to enforce consumer-protection laws, citizens don’t get to make their case before a jury of their peers when those laws fail, and even corporations with long histories of documented harm will get to decide how much, if anything, they owe their victims.” (source)

On January 30, 2023 a U.S. appeals court shot down Johnson & Johnson’s attempt to offload tens of thousands of lawsuits over its talc products into bankruptcy court. This is very big news in the business law world because the ruling marks the first major repudiation of an emerging legal strategy with the potential to upend U.S. corporate liability law.  It is also very big news for the victims…

The Circuit Court of Appeals has now ruled that Johnson & Johnson improperly placed its subsidiary into bankruptcy even though it faced no financial distress. J&J’s two-step sought to halt more than 38,000 lawsuits from plaintiffs alleging the company’s baby powder and other talc products caused cancer.  But the decision by the U.S. 3rd Circuit Court of Appeals in Philadelphia this week dismissed the bankruptcy filed by the J&J subsidiary in 2021. Before the filing, J&J had faced costs of $3.5 billion in verdicts and settlements***.  The bottom line: The appeals court ruling revives the victims’ lawsuits.

J&J Scheme Fails, Cancer Victims Prevail – Chemical Free Life