The Third Circuit Federal Court of Appeals rejected an attempt by Johnson and Johnson to use Bankruptcy to avoid talcum powder litigation.
This is a significant win for plaintiffs who developed cancer from talcum powder exposure. This is also a win for Roundup plaintiffs.
J&J has faced mounting lawsuits–in fact, around 40,000 suits–alleging its talcum products cause cancer, contain asbestos, and cause mesothelioma. And, a handful of these suits have gone to trial and led to significant jury verdicts for the person who developed cancer.
To avoid this, J&J engaged in what some people call the “Texas Two-Step.” J&J created a new entity called “LTL Management,” pushed all its liability into that entity, then put that new organization into bankruptcy. For a while, that stopped the talc lawsuits and transferred them to the jurisdiction of a New Jersey bankruptcy court. However, the Court of Appeals dismissed the bankruptcy petition finding that LTL was created just to file bankruptcy.
This will allow people who developed cancer as a result of J&J talc to potentially have their day in court. More importantly, it will help stop the “Texas Two-Step” procedure large healthcare companies are using to absolve themselves of liability. People who developed non-Hodgkin lymphoma from exposure to Roundup and who are suing Monsanto and Bayer over that had their eye on this decision in particular, fearing that Monsanto/Bayer may try something similar.