Johnson & Johnson will seek US Supreme Court review of talc bankruptcy case

After Johnson & Johnson failed to convince a federal appeals court to revive its bid to use Chapter 11 bankruptcy as a way to freeze nearly 40,000 talc lawsuits, the New Brunswick-based health conglomerate plans to seek U.S. Supreme Court review.

In a March 22 ruling, the Third Circuit Court in Philadelphia rejected a motion to rehear the case, upholding an earlier decision to dismiss it because neither Johnson & Johnson nor its subsidiary, LTL Management, was in “financial distress.”

LTL was created two years ago by J&J to resolve legal claims linking its talc-based products to cancer. After assigning the claims to LTL, J&J placed the subsidiary into Chapter 11 proceedings as a way to consolidate and address claims, including ones filed by current and future claimants. It also earmarked corporate funds for LTL to resolve the claims en masse.

The legal strategy, known as the Texas two-step, has frozen the lawsuits for 17 months. Dismissal of the Chapter 11 filing would return those cases back to the civil tort system.

Following a January decision, in which the Third Circuit ruled that LTL was not eligible for bankruptcy protection, the company asked the court to rehear its case.

After the latest hearing this month, J&J issued a statement, saying, “We will immediately move for a stay of this opinion so we can seek review directly from the U.S. Supreme Court. Today’s ruling ignores the facts established during the Bankruptcy Court’s trial regarding the appropriateness of LTL Management’s (LTL) formation and filing, as well as the Company’s intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants.”

“We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer,” the company said.

Prior to the bankruptcy filing, J&J faced $3.5 billion in verdicts and settlements stemming from talc lawsuits. However, more than 1,500 complaints have reportedly been dismissed and most cases that went to trial resulted in defense verdicts, mistrials or judgements for the company on appeal.