Judge allows expedited appeal of J&J’s talc bankruptcy strategy

A bottle of Johnson and Johnson Baby Powder is seen in a photo illustration taken in New York, February 24, 2016. REUTERS/Shannon Stapleton/Illustration

A US bankruptcy judge on Wednesday granted an expedited appeal of his ordered this allowed Johnson & Johnson to use the bankruptcy system to try to resolve a multi-billion dollar lawsuit claiming its talc products caused cancer.

Last month, Judge Michael Kaplan ruled that a Chapter 11 filing by a J&J subsidiary was not an abuse of the bankruptcy system. On Wednesday, it allowed cancer plaintiffs to challenge that ruling directly in the 3rd U.S. Circuit Court of Appeals, accelerating a dispute that has drawn attention and criticism from lawmakers.

“Obviously this has an impact on decisions and potential restructurings beyond what is being argued in this court,” Kaplan said Wednesday.

J&J used a “two-step Texas,” which allows companies to separate valuable assets from liabilities through a so-called split merger. In October, J&J, which maintains its talc products are safe, filed the claims with a newly created entity called LTL Management LLC, which filed for bankruptcy days later.

Kaplan said bankruptcy would provide a faster and fair alternative to jury trials to resolve 38,000 individual lawsuits. But critics, such as Sen. Sheldon Whitehouse of Rhode Island, have called the bankruptcy maneuver a “stain on our legal system” that allows wealthy corporations to avoid facing victims in court.

LTL had opposed an expedited appeal and requested that the dispute be heard first in a US district court. Kaplan rejected that, saying an interim appeal “is of no use” and would delay the final resolution of the case.

Kaplan also ruled on Wednesday that talc plaintiffs should be represented by a single formal panel in the bankruptcy case. Lawyers representing mesothelioma patients had argued that there should be separate committees to represent ovarian cancer plaintiffs and mesothelioma plaintiffs.

In the 38,000 cases that led J&J to file LTL for bankruptcy, plaintiffs alleged that J&J’s talc products contained asbestos and caused ovarian cancer and mesothelioma, a type of cancer linked to asbestos exposure.

J&J denies the claims, saying decades of scientific testing and regulatory approvals have shown its talc to be safe and asbestos-free.

Prior to filing for bankruptcy, the company was facing costs of $3.5 billion in verdicts and settlements, including one in which 22 women won a judgment of more than $2 billion, according to bankruptcy court records. .

The case is LTL Management LLC, US Bankruptcy Court for the District of New Jersey, No. 21-30589.

For LTL: Greg Gordon of Jones Day

For Committee I of Talc Claimants: David Molton of Brown Rudnick; Melanie Cyganowski from Otterbourg; Genova Burns’ Daniel Stolz; Brian Glasser of Bailey & Glasser; Lenard Parkins by Parkins Lee & Rubio; and Jonathan Massey of Massey & Gail

For the Talc Applicants Committee II: Cullen Speckhart of Cooley

Read more:

Johnson & Johnson defends talc bankruptcy strategy called ‘rotten’ by cancer plaintiffs

Judge Gives Green Light to J&J’s Strategy to Resolve Talc Lawsuits in Bankruptcy Court

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