888-681-1129
The ongoing saga of pharmaceutical giant Johnson and Johnson’s third attempt to file for bankruptcy and resolve over 61,000 lawsuits involving its talc products has escalated into a battle between two factions of law firms representing women who allege that they developed cancer as a result of using J&J’s cosmetic talc products.
This is the third time J&J has tried to employ “the Texas two-step”, a controversial divisive merger maneuver designed to shield companies from current and future lawsuits. J&J first used the strategy in 2021, transferring all of its talc-related liability to a new subsidiary – LTL Management LLC (now LLT Management LLC) and then immediately placing that company into bankruptcy. In January 2023, the U.S. Court of Appeals for the Third Circuit Court rejected J&J’s arguments that bankruptcy was the fairest way to resolve its talc claims, finding that LTL faced no financial distress. In support of its ruling, the Third Circuit pointed to the hundreds of billions of assets held by parent J&J as well as the funding agreement it promised to LTL that was designed to settle all current and future talc claims.
Two groups of law firms are now in opposition to J&J’s current plan to file bankruptcy a third time, this time in the U.S. Court of Appeals for the Fifth Circuit; the earlier attempts were filed in the U.S. Courts of Appeals for the Third and Fourth Circuits. The first group of attorneys supports accepting the $6.48 billion settlement, pointing to material improvements made to the earlier plans. In order for the current settlement to be accepted, 75% of the plaintiffs would need to agree by the July 26 deadline.
Another group of firms opposes the revised plan and has filed a motion for a temporary restraining order and preliminary injunction barring J&J from proceeding with the settlement in a class action that was filed last month in New Jersey federal district court. This second group claims that with its latest pre-packaged bankruptcy attempt J&J engaged in “fraudulent” asset transfers and forum shopping and denied claimants the recoveries they are owed. One attorney pointed to the fact that J&J is a $360 billion publicly traded company in no financial distress. As part of the class action, the attorneys opposed to the filing are seeking exceptions to attorney-client privilege in an effort to gain access to emails and other communications among J&J’s in-house counsel that might reveal the company’s strategies in handling its talc liability. No date for the hearing has been set yet although counsel has requested that the injunction hearing be held as soon as possible.
On June 10, in a separate move, J&J reached a tentative $700 million settlement with 43 states and the District of Columbia over charges of misleading marketing practices of its talcum powder. As part of the settlement J&J has agreed to stop manufacturing all talc products although the company admits no wrongdoing. If the settlement is approved the company will issue the first of four $175 million payments to 42 states and the District of Columbia; payments are then set to made over the next three years.
Resources
https://reorg.com/articles/jj-to-file-third-texas-2-step/
Preliminary Draft Disclosure by LLT Management LLC statement dated May 1, 2024
https://www.asbestos.com/news/2024/06/12/johnson-johnson-700-million-talc-settlement/
https://www.cbsnews.com/news/johnson-johnson-baby-powder-settlement-talc/
https://www.reuters.com/legal/new-york-sues-johnson-johnson-2024-06-11/