US courts dismiss J&J’s bankruptcy talc case “as not filed in good faith,” company poised to challenge ruling

31 Jan 2023 --- A judge in the US appeal court has “dismissed” Johnson and Johnson’s (J&J) subsidiary, LTL management’s bid for bankruptcy protection at the Third Circuit Court of Appeals in Philadelphia. This comes after an onslaught of multi-billion dollar legal claims against the iconic baby powder company – on the basis that the talc powder may contain traces of asbestos and thereby causes cancer.

In the court document, Judge Thomas Ambro underscores that only “a putative debtor in financial distress” is eligible for relief; however, since LTL did not meet the criteria, Ambro decided not to pass the Chapter 11 petition on Monday.

However, J&J has fired back with a statement, particularly disagreeing with the Bankruptcy Court’s judgment that LTL’s – a company set up to manage legal claims tied to J&J’s talc – filing was not in “good faith.”

J&J still insists on the safety of its Johnson’s Baby Powder.

“We will challenge the Third Circuit’s ruling. LTL initiated this process in good faith. Our objective has always been to equitably resolve claims related to the company’s cosmetic talc litigation,” reads J&J’s statement issued yesterday.

Johnson’s Baby Powder was first sold in 1894.“Today’s (Monday’s) ruling does not reflect the facts established during the Bankruptcy Court’s trial regarding the appropriateness of LTL’s formation and filing, nor the company’s intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants.”

Question of faith
The judgment on J&J’s “faith” might be based on the scenario that if the petition passed successfully, J&J would have been able to resolve the financial costs tied to the legal claims from its customers. Nachawati Law Group says Chapter 11 would have shed “more than 38,000 lawsuits filed by women who developed ovarian cancer after using J&J’s talc-based products.”

The Nachawati Law Group represents women diagnosed with ovarian cancer after years of using Johnson’s Baby Powder and other talc products produced by the company.

“Our clients are grateful that the appellate court saw through this,” says Nachawati. “We will press forward to ensure that jury trials resume, and these women can have the opportunity for justice they deserve.”

With thousands of lawsuits to resume, Nachawati adds that J&J’s liability could exceed the US$60 billion it had set aside for the LTL bankruptcy.

Moreover, the court document notes that the US Food and Drug Administration (FDA) had found asbestos traces in a sample of Johnson’s Baby Powder in 2019 and Health Canada’s confirmed in 2021 its 2018 finding of a significant association between exposure to talc and ovarian cancer.

In other news, the FDA declared that asbestos was not detected in 50 talc-containing cosmetic products tested.

Strengthening stance for safetyAmbro underscores that only “a putative debtor in financial distress” is eligible for relief.
J&J began resolving claims raised in the cosmetic talc lawsuits, which led to the formation of LTL in 2021 which is responsible for managing legal claims related to J&J’s cosmetic talc. LTL had filed a petition for Chapter 11 relief in the Bankruptcy Court for the Western District of North Carolina in October 2021.

“As we have said from the beginning of this process, resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders. We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer,” states J&J.

Moreover, the company, on its website, says that it is prepared to address every talc case against J&J. However, on a more practical level, it notes that going through the process individually could take “thousands of years.”

“Even then, there is no known, definitive outcome or guarantee that all cases would reach a resolution. The US tort system is not equipped to resolve thousands of cases quickly or efficiently,” says the company.

“The Chapter 11 process brings everyone to the table to negotiate an agreement, provides for the quickest and most efficient resolution for people who have legal claims related to talc and provides certainty for all parties.”

Furthermore, J&J says that Chapter 11 would allow people with legal claims in the future to participate in the resolution through an independent representative, called a “Future Claims Representative,” appointed by the Bankruptcy Court. “That Court-appointed agent assesses the number of future claims and the total amount of fair compensation and determines how compensation should be distributed.”

Last August, J&J announced its plan to internationally “transition to an all cornstarch-based baby powder portfolio” – replacing its talc-based Baby Powder. This decision came as the Talcum Powder Compensation Center urged US consumers of J&J’s Baby Powder to reach out to a legal team for “millions of dollars” as compensation.

By Venya Patel