Chapter 11 bankruptcy dismissed
The 3rd U.S. Circuit Court of Appeals based in Philadelphia on Friday ruled that Johnson & Johnson, on behalf of its subsidiary, LTL Management, could not delay a court order dismissing its bankruptcy. Johnson & Johnson had sought to stay the court order while the company plans to appeal to use the bankruptcy to resolve tens of thousands of lawsuits over its talc products. LTL has not yet filed a formal petition to the U.S. Supreme Court.
In January, the 3rd Circuit had ruled that neither LTL nor J&J were in financial distress, and therefore did not have a legitimate need for bankruptcy protection. The judge overseeing the case, U.S. Bankruptcy Judge Michael Kaplan indicated that as soon as the 3rd Circuit issued a formal mandate to end the bankruptcy, he would allow talc lawsuits to resume. The 3rd Circuit on Friday directed Judge Kaplan to dismiss LTL’s Chapter 11 case.
There are more than 38,000 lawsuits alleging that the company’s baby powder and other talc products are contaminated with asbestos and have caused ovarian cancer and mesothelioma. J&J maintains that its consumer talc products are safe and asbestos-free. They stopped selling the talc baby powder in the U.S. and Canada in 2020 and announced that they intended to discontinue the product worldwide in 2023.
Third Circuit Court dismisses J&J’s bankruptcy bid
In a reversal of a New Jersey bankruptcy judge’s ruling, the Third Circuit on Monday dismissed the Chapter 11 bankruptcy case filed by Johnson & Johnson spinoff, LTL Management.
“Good intentions— such as to protect the J&J brand or comprehensively resolve litigation—do not suffice alone,” the opinion said of the debtor’s good faith. “What counts to access the bankruptcy code’s safe harbor is to meet its intended purposes. Only a putative debtor in financial distress can do so. LTL was not. Thus we dismiss its petition.”
- October 2021 – LTL Management LLC is a new entity created by Johnson & Johnson in order to spin off billions in talc liability along with some nominal assets.
- October 14, 2021 LTL files for Chapter 11 bankruptcy in North Carolina court. Talc claimants filed motions to dismiss the case.
- Weeks later, the case was transferred to New Jersey, where J&J is headquartered.
- February 25, 2022 a New Jersey bankruptcy judge allowed the bankruptcy filing by LTL to proceed.
- September 19, 2022 plaintiffs argued in federal appeals court for a reversal of the bankruptcy court’s decision.
- January 30, 2023 Third Circuit issues its ruling dismissing the Chapter 11 case and says “the company was not in financial distress and lacked the required good faith to commence its bankruptcy case.” Law360