News Desk
WASHINGTON: A United States federal appeals court on Monday rejected a bankruptcy filing by a Johnson & Johnson subsidiary, rebuffing the company’s attempt to resolve tens of thousands of cancer lawsuits over its talcum-powder products.
The court ruled that the firm improperly placed its subsidiary into bankruptcy even though it faced no financial distress.
Over 40,000 plaintiffs alleged J&J’s talc led to cancer
More than 40,000 plaintiffs have sued J&J, alleging that the company’s baby powder and other talc products led to cancer. Some of the lawsuits claimed that the firm had known for decades that its baby powder and other talc-based products could have contained traces of asbestos, a carcinogen. Others claim the talc itself was an irritant that caused cancer. The plaintiffs include women who say using baby powder caused ovarian cancer, as well as others who say it led to mesothelioma, a lung disease caused by exposure to asbestos.
The company could suffer billions of dollars in payouts from the cases it has lost. In 2021, it created a subsidiary, called LTL Management, that would be liable for those claims. Days after it was created, the subsidiary filed for bankruptcy protection, immediately leading to legal challenges from plaintiffs who saw it as a strategy of the company to limit what it would ultimately have to pay out in the talc lawsuits.
J&J shares on Monday skidded 3.7% – the biggest daily percentage decline in two years. The healthcare conglomerate said in a statement that it would challenge the ruling and that its talc products were safe. J&J is among four major companies that have filed so-called Texas two-step bankruptcies to avoid potentially massive lawsuit exposure, in a tactic that involves creating a subsidiary to absorb the liabilities and to immediately file for Chapter 11 of the United States Bankruptcy Code.
