On October 4, 2022, U.S. bankruptcy judge Michael Kaplan temporarily stayed two state lawsuits alleging Johnson & Johnson misled consumers about the safety of its talc products while the appeals court reviews the legitimacy of the company’s bankruptcy strategy. The judge blocked New Mexico and Mississippi’s lawsuits against J&J until the appellate court decides whether the company can use its subsidiary’s bankruptcy to resolve pending talc litigation. This news comes nearly a year after Johnson & Johnson announced its controversial bankruptcy plan.
The Anniversary of J&J’s “Texas-Two Step”
On October 14, 2021, Johnson & Johnson announced the creation and subsequent bankruptcy of a new subsidiary, LTL Management. The company explained that it established LTL Management to manage claims in the cosmetic talc litigation. Plaintiffs in talcum powder lawsuits claim Johnson & Johnson talc-based products, such as its baby powder, contain the carcinogenic mineral asbestos. Individuals argue that prolonged usage of the company’s talc products caused them to develop certain forms of cancer, including mesothelioma and ovarian cancer.
J&J explained on its website that LTL Management filed for voluntary Chapter 11 bankruptcy in order to “resolve all claims related to cosmetic talc in a manner that is equitable to all parties, including any current and future claimants.” While Johnson & Johnson did not file for bankruptcy, it did form a $2 billion trust for LTL Management to facilitate the settlement of talcum powder lawsuits. Opponents of J&J’s “Texas-Two Step” legal maneuver argue that $2 billion is a woeful sum to fairly compensate the thousands of victims of the company’s talcum power products. When J&J revealed this bankruptcy scheme, there were over 37,000 pending talc lawsuits in multidistrict litigation against Johnson & Johnson. However, LTL Management’s bankruptcy left talcum powder lawsuits in limbo since Chapter 11 bankruptcy proceedings pause litigation.
Bankruptcy Judge Halts State Talc Lawsuits Against Johnson & Johnson
In September 2022, a 3rd U.S. Circuit Court of Appeals panel heard arguments to overturn Johnson & Johnson’s bankruptcy tactic. The appellate court is still reviewing Johnson & Johnson’s bankruptcy plan for LTL Management, but in the meantime, bankruptcy judge Michael Kaplan temporarily blocked New Mexico and Mississippi’s lawsuits against J&J. The Attorney Generals of New Mexico and Mississippi filed lawsuits against Johnson & Johnson for the false marketing of its talc-based products.
In February 2022, Judge Kaplan upheld Johnson & Johnson’s bankruptcy method, effectively pausing talc litigation. However, New Mexico and Mississippi proceeded with lawsuits against the company. The states cited that the February order only blocked private plaintiffs, and Judge Kaplan did not have the power to prevent them from enforcing consumer protection laws. In response, LTL Management sued New Mexico and Mississippi for moving forward with their claims. Forty-one states and the District of Columbia supported New Mexico and Mississippi in their efforts against Johnson & Johnson. These states argued that, unlike private litigation, state litigation would not spur copycat lawsuits that would disrupt LTL’s restructuring.
Despite the overwhelming support from private plaintiffs and states, Judge Kaplan ultimately ruled to stay New Mexico and Mississippi talcum powder litigation. Judge Kaplan mentioned he will revisit permitting New Mexico and Mississippi’s lawsuits come December.