Legislation & Litigation

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A North Carolina federal judge has inflicted a major setback on Johnson & Johnson and its controversial plan to discharge all talc-related litigation in Connecticut bankruptcy court through a newly formed subsidiary.

Bankruptcy judge Craig Whitley said he was “compelled” to move the case from North Carolina to New Jersey, where Johnson & Johnson is headquartered and thousands of talc-related lawsuits are already underway.

The move from North Carolina to New Jersey shifts J&J from one jurisdiction seen as favorable to its Connecticut bankruptcy strategy to one that is unfavorable to it, based on previous cases.

Johnson & Johnson is facing a slew of lawsuits – more than 36,000 – over allegations that its asbestos-contaminated baby powder has caused various malignant tumors, including ovarian cancer and mesothelioma.

The settled claims and jury verdicts have already cost the company around $ 3.5 billion, along with another billion dollars in defense costs. His Chapter 11 bankruptcy plan could save billions in the future by creating a shield that would stop all future litigation.

Johnson & Johnson is considered one of America’s most profitable companies, with a market share of over $ 450 billion.

New subsidiary to take on talc responsibilities

J&J had led the federal bankruptcy case in Charlotte, North Carolina, through its newly formed subsidiary, LTL Management LLC. He created the subsidiary earlier this year in Texas, a state that allows business assets to be separated from liabilities. He then moved the branch to North Carolina and quickly filed for bankruptcy.

According to court documents from its bankruptcy petition, LTL Management assessed its value at $ 10 billion, along with a liability of $ 10 billion.

“Fortunately Judge Whitley understood what J&J was trying to do. I believe them [bankruptcy] the petition will be dismissed in New Jersey, ”Daniel Wasserberg, a New York City lawyer specializing in asbestos-related litigation, told Asbestos.com’s Mesothelioma Center. “J&J will return to the tort system they belong to, and they will be forced to face the music for their deadly talcum powder. It was an extremely costly miscalculation on J&J’s part.

Other companies have used similar tactics in the past to avoid liability. This has caught the attention of Congress, which is considering legislation to change the rules governing Chapter 11 bankruptcy filings.

In July, a US House of Representatives oversight committee sent a letter to Johnson & Johnson urging it to abandon the bankruptcy maneuver and asking for answers on its strategy.

Talc lawsuits temporarily suspended

At Wednesday’s court hearing, Whitley agreed to stay all talc-related lawsuits against J&J for 60 days, pending a ruling from the federal bankruptcy court which will now come from New Jersey.

Lawyers across the country representing plaintiffs in the cases against J&J have applauded the move to New Jersey, where the bankruptcy protection claim is expected to be dismissed.

LTL Management issued a statement in response to the order that moved the case from North Carolina to New Jersey.

“While we believe this matter has been properly heard in North Carolina, we will continue to work with all parties to seek an effective and fair resolution,” the statement said.

As part of bankruptcy protection, all legal proceedings in state and federal courts would be halted and eventually be brought before a single bankruptcy judge. This would allow J&J to separate its immense profitability from all potential liabilities, which would be considerably smaller under bankruptcy protection. The court would determine how much to put in a trust fund, from which current and future claimants would be compensated.

The first talc case against J&J occurred in 2014. Until 2020, J&J had argued numerous cases in court and defended the safety of its products. Although J&J has won many lawsuits, it has also lost huge ones.

Earlier this year, the United States Supreme Court rejected a request by J&J to overturn an earlier $ 2.1 billion judgment in Missouri involving 22 women with ovarian cancer.

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