On September 19, 2022, oral argument was held before the Third Circuit Court of Appeals in Philadelphia during which attorneys for talc injury victims urged the Court to allow their clients to pursue their claims against Johnson & Johnson maintaining their position against the Chapter 11 bankruptcy of its subsidiary LTL Management LLC, an entity created to handle the massive liability facing J&J as a result of its talc products. The victims claim that their use of J&J’s talc-based products, including its iconic baby powder, caused them to develop ovarian cancer and mesothelioma.
Critics of the legal maneuver that created LTL , dubbed the “Texas two-step”, maintain that LTL was designed solely to allow J&J to avoid its mass tort liability. The pharmaceutical giant created the subsidiary in October and placed it into bankruptcy two days later. Plaintiffs’ attorneys argue that the bankruptcy would necessitate a lengthy process that would allow LTL to pay less over a longer period of time. They also argued that U.S. Bankruptcy Judge Michael B. Kaplan erred in not dismissing the Chapter 11 case, given the fact that there were clear signs that the parent company acted in bad faith when it created LTL and immediately sent it into bankruptcy.
J&J maintains, however, that handling the cases through the bankruptcy court will ensure consistency and fairness to all claimants. When LTL was created, it was funded with $2 billion and J&J committed a $61 billion funding agreement dedicated to compensating talc claimants.
The U.S. Trustee also argued against the bankruptcy at the hearing, pointing out that the rights of the talc victims would be subordinated to all other creditors, limiting any recovery.
The three judge panel reserved its judgment and took the matter under advisement.
In a related development, Judge Kaplan of the U.S. Bankruptcy Court for the District of New Jersey, the court currently handling the LTL matter, revealed that he and his staff had been threatened by messages delivered via emails, phone calls, and social media by individuals who disagreed with his decision in February not to dismiss the LTL bankruptcy. The judge urged the attorneys on the case to exercise restraint in the language they use, requesting that they be aware that their rhetoric could create problems for the court system.
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