New Ruling Against Johnson & Johnson Puts Thousands of Asbestos Cases Back in Motion

For those following the J&J asbestos cases and associated bankruptcy, a recent new development has changed the playing field in significant ways.

To catch up readers who may not be familiar with the case, here are the basics:

Asbestos Contamination and Initial Lawsuits

• J&J produced asbestos-contaminated talcum powder products for many decades—and were allegedly aware of the contamination. Johnson & Johnson’s talcum powder products, including baby powder and Shower-to-Shower powder, consistently tested positive for asbestos contamination since at least the 1950s. Internal J&J documents indicated that the company was aware of this and continued manufacturing the products regardless, even after the dangers of asbestos became abundantly clear around the late 1970s.

• Many tens of thousands of people who were exposed to asbestos via Johnson & Johnson products have developed ovarian cancer or mesothelioma.  Medical research has causally linked the use of asbestos-contaminated talcum powder to both conditions.

• Thousands of lawsuits have been filed against J&J for damages by cancer patients and their families. Many victims who were exposed (or had their loved one exposed) to asbestos via a J&J product have filed lawsuits against the company for damages. Approximately 50 of these lawsuits have gone to trial so far, resulting in billions of dollars in jury verdicts against J&J. There are nearly 40,000 similar suits currently pending.

J&J’s Bankruptcy Scheme

• To avoid liability, J&J utilized a scheme called the “Texas Two-Step”. While some believe that J&J went bankrupt from their lawsuits, the truth is much more complicated—and much more unfair to the people who have been harmed. In fact, Johnson & Johnson never went bankrupt, and continues to operate as a very lucrative company worth hundreds of billions of dollars, if not more, to this day.

To avoid having to fairly compensate their victims and creditors, J&J utilized a procedure called a “divisive merger” (also known as the “Texas Two-Step”) in 2021. This involved forming two new companies: one with all of the assets, the product line, and nearly all business J&J is involved with, which would continue  operating as usual, and the other, LTL Management, with all of the talc liability.

LTL Management was immediately moved to North Carolina, a jurisdiction considered more favorable to corporate interests, and then declared bankruptcy a few days later. The North Carolina bankruptcy court ultimately moved the case to New Jersey, where Johnson & Johnson is headquartered.

• As a part of the ensuing “bankruptcy” proceedings, all of the lawsuits against Johnson & Johnson were frozen as of October 2021. When a company declares bankruptcy, all lawsuits against it are immediately paused (or “stayed”). As a result of the legal maneuvering involved in the “Texas two-step”, when LTL Management declared bankruptcy, all of the nearly 40,000 asbestos lawsuits filed against Johnson & Johnson were effectively frozen.

• Johnson & Johnson submitted a bankruptcy plan, which was granted preliminary approval. This “bankruptcy” plan would not involve J&J functionally going bankrupt at all. Rather, it would involve funding LTL Management only a certain amount, which would be divided amongst its creditors (i.e., the people with asbestos lawsuits against J&J), thereby getting rid of the lawsuits and all future lawsuits and allowing J&J to continue operating as usual without suffering any of the normal consequences of declaring bankruptcy.

The Update

• In January of 2023, Johnson & Johnson’s bankruptcy plan was rejected by the U.S. Court of Appeals for the Third Circuit. A group of asbestos claimants asked the bankruptcy court handling the case to dismiss the bankruptcy or lift the stay on lawsuits against J&J, so that people pursuing those lawsuits could have their day in court.

The bankruptcy judge handling the case in New Jersey rejected that request, with the reasoning that claimants would get a much more expedient resolution in bankruptcy court. He argued that since there were so many lawsuits and only 50 had gone to trial so far, it would take far too long to do it any other way.

However, the claimants disagreed with this ruling, and went straight to the Third Court of Appeals to appeal it. After hearing their appeal, the Third Court of Appeals ruled in the claimants’ favor, saying the bankruptcy should be dismissed. The Court of Appeals further found that the bankruptcy was not filed in good faith, since the company was not actually in financial distress (in part because the actual parent company, J&J, was not in financial distress).

• This means that all previously frozen asbestos liability lawsuits against Johnson & Johnson are back in motion. As a result of this massive win for claimants, the cases will be returned to the court system, and those harmed by Johnson & Johnson will be able to pursue their claims individually, as had been done in the past.

Barring further legal interference by Johnson & Johnson, it is expected that by spring or early summer of 2023, all those who filed lawsuits against Johnson & Johnson for asbestos exposure damages will be able to have their day in court.

The attorneys working hard on behalf of those who have been harmed by asbestos exposure via Johnson and Johnson talcum powder products are thrilled with this development. They look forward to helping their clients get the justice they deserve and are entitled to by our tort system and the Seventh Amendment of the Constitution.

Have you or a loved one been damaged by exposure to asbestos-contaminated Johnson & Johnson products? Let us fight for you.

Contact the Law Firm of Satterley and Kelley PLLC at (855) 385-9532 to learn more.