Bankruptcy Experts Join Appeal to Dismiss J&J Talc Ch. 11

A bottle of Johnson and Johnson Baby Powder in an illustrative photo. REUTERS/Shannon Stapleton/Illustration

(Reuters) – A group of bankruptcy law professors are seeking to weigh in on Johnson & Johnson’s use of the bankruptcy system to settle lawsuits alleging its talc products cause cancer, calling the strategy “serious abuse”.

The group filed court documents Tuesday, seeking approval to submit a “friend of the court” brief in support of an effort by a committee representing those who sued J&J’s talc products to have the subsidiary’s bankruptcy dismissed. J&J, LTL Management LLC. The seven professors argued that the pharmaceutical giant should not be allowed to use bankruptcy to get rid of its talc-related debts while it is in good financial shape.

The filing comes weeks before U.S. Bankruptcy Judge Michael Kaplan of New Jersey is scheduled to hear arguments regarding the committee’s motion to dismiss the case.

LTL’s bankruptcy was filed in October to resolve approximately 38,000 claims alleging J&J’s talc products caused mesothelioma and ovarian cancer. J&J, which maintains that its talc products are safe, created LTL to offload talc-related liabilities and then filed for bankruptcy in an effort to settle those claims instead of litigate them individually in various courts.

The professors, including Jared Ellias of the University of California, Hastings School of Law and Kenneth Ayotte of the University of California, Berkeley School of Law, accused J&J of attempting to “deprive innocent victims of of talcum powder from their day in court”. While this isn’t the first time a company has used bankruptcy to manage tort liabilities, it’s an “alarming” trend, the professors said.

A spokesperson for LTL said in a statement Wednesday that the courts have recognized that resolving these types of claims through Chapter 11 is a legitimate use of the restructuring process. The spokesperson also said that while LTL does not believe the claims are valid, it expects them to increase in number.

“Our overarching goal is to achieve a fair and just resolution for the plaintiffs through a plan of reorganization,” the spokesperson said.

The professors echoed the talc committee’s concerns about the validity of the bankruptcy, calling it a “direct attack on the fundamental integrity” of Chapter 11.

Clay Thompson of Maune Raichle Hartley French & Mudd, which represents plaintiffs accusing J&J of causing their mesothelioma, said that “frank and unvarnished discussions from academics are rare and highlight how J&J’s abuse of the process of bankruptcy is flagrant”.

The case is In re LTL Management LLC, US Bankruptcy Court, District of New Jersey, No. 21-30589.

For LTL Management: Gregory Gordon, Dan Prieto, Amanda Rush and Brad Erens of Jones Day

For the Committee: David Molton of Brown Rudnick; Melanie Cyganowski from Otterbourg; Genova Burns’ Daniel Stolz; Brian Glasser of Bailey Glasser; Lenard Parkins by Parkins Lee & Rubio; and Jonathan Massey of Massey & Gail

For teachers: Sean O’Donnell, Stephen Selbst, Steven Smith and Rachel Ginzburg of Herrick Feinstein

Read more:

J&J unit, talc plaintiffs look to February bankruptcy validity hearing

J&J legal strategy for baby powder, talc liability

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