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 J&J put the talc claims into an entity called LTL Management LLC,
which filed for bankruptcy protection on Thursday in North Carolina,
according to the company and court records. J&J and its affiliates
were not part of the bankruptcy filing.
Tens of thousands of plaintiffs have alleged J&J's Baby Powder and
other talc products contained asbestos and caused cancer, which the
company denies. The plaintiffs include women suffering from ovarian
cancer and others battling mesothelioma.
J&J executed Thursday's corporate reshuffling through a contentious
legal maneuver known as a Texas two-step bankruptcy, a strategy
other companies facing asbestos litigation have used.
In that process, a J&J business split in two through a so-called
divisional merger under Texas law. That transaction created LTL, the
new entity saddled with J&J's talc liabilities, according to court
papers filed Thursday.
J&J, with a market value exceeding $400 billion, said the talc cases
would be halted while LTL navigates bankruptcy proceedings.
The company's costs defending nearly 40,000 cases have approached $1
billion, according to bankruptcy-court filings Thursday. Settlements
and verdicts have cost J&J about $3.5 billion more.
"We are taking these actions to bring certainty to all parties
involved in the cosmetic talc cases," J&J General Counsel Michael
Ullmann said in a statement.
"While we continue to stand firmly behind the safety of our cosmetic
talc products, we believe resolving this matter as quickly and
efficiently as possible is in the best interests of the (company)
and all stakeholders," Ullmann added.
Plaintiffs' lawyers decried the bankruptcy filing. J&J's "bankruptcy
gimmick is as despicable as it is brazen" and "an unconscionable
abuse of the legal system," said Linda Lipsen, chief executive of
the American Association for Justice, a trial lawyers' group, in a
statement.
J&J said it would fund LTL's legal costs for talc cases in an amount
later determined by a bankruptcy judge, with an initial advance of
$2 billion. LTL has also received certain royalty revenue streams
with a present value of more than $350 million to contribute to
potential legal costs, J&J said.
[to top of second column] |
 HIGH-STAKES LITIGATION
Reuters first reported in July that J&J was
exploring offloading its talc liabilities and
placing them into bankruptcy.
Thursday's move shifted high-stakes litigation
over the safety of J&J’s talc from courtrooms
across the United States to one legal proceeding
before a federal bankruptcy judge who could
potentially force a settlement among the
blue-chip company and plaintiffs.
During earlier settlement discussions, a J&J
attorney told plaintiffs' lawyers that the
company could pursue the bankruptcy plan, which
might result in lower payouts for cases that do
not settle beforehand, Reuters previously
reported.
In the weeks leading up to Thursday’s bankruptcy
filing, lawyers representing women with cancer
claims asked multiple judges to forbid J&J from
executing such a maneuver, only to be turned
down.
The company maintained in statements and in
court proceedings over the summer that it had
not decided whether to pursue the maneuver.
A 2018 Reuters investigation found J&J knew for
decades that asbestos, a known carcinogen,
lurked in its Baby Powder and other cosmetic
talc products. The company stopped selling Baby
Powder in the United States and Canada in May
2020, in part due to what it called
"misinformation" and "unfounded allegations"
about the talc-based product.
J&J maintains its consumer talc products are
safe and confirmed through thousands of tests to
be asbestos-free.
In bankruptcy-court papers, lawyers for the
newly created J&J subsidiary said the Chapter 11
filing was “necessitated by an unrelenting
assault by the plaintiff trial bar, premised on
the false allegations that the ... talc products
contain asbestos and cause cancer."
In June, the U.S. Supreme Court declined to hear
J&J's appeal of a Missouri court ruling that
resulted in $2 billion of damages awarded to
women alleging the company's talc caused their
ovarian cancer.
J&J has prevailed in other recent talc cases.
 (Reporting by Mike Spector in New York and Dan
Levine in San Francisco; Additional reporting by
Amruta Khandekar and Nate Raymond in Boston;
Editing by Peter Cooney and Cynthia Osterman)
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