Lawyers for Women Pursuing Talcum Powder Cancer Lawsuits Tell 3rd Circuit J&J Bankruptcy “Built on a Foundation of Bad Faith”

A federal appeals court heard oral arguments this week from lawyers for women pursuing talcum powder cancer lawsuits, who are challenging a controversial bankruptcy filing by Johnson & Johnson, which they indicate was conducted in bad faith to derail the litigation and avoid liability costs the company could easily cover.

Johnson & Johnson faces more than 38,000 Baby Powder lawsuits and Shower-to-Shower lawsuits filed by women diagnosed with ovarian cancer, mesothelioma and other injuries, which they claim was caused by asbestos in the talc-based products.

Following massive jury awards in a number of early trials, Johnson & Johnson decided to pursue a controversial “Texas Two-Step” bankruptcy plan in February, attempting to spin off all liability it faces for failing to warn consumers about the cancer risks from talcum powder into a separate company, LTL Management, LLC, which was created solely for the purpose of placing it into bankruptcy.

The U.S. Third Circuit Court of Appeals heard a challenge to the filing on Monday, which will determine whether the company will be allowed to shield itself from potentially billions of dollars in claims, and force settlements through a bankruptcy process, which critics claim is a clear misuse of the system.

While Johnson & Johnson continues to maintain that the bankruptcy filing was legally valid, plaintiffs’ attorneys pointed out that the company brought in $93.8 billion in revenue last year, and does not need the bankruptcy protections, other than to use the process to limit the amount of damages it will have to payout, telling the appeals court that the maneuver was “built on a foundation of bad faith.”

In June, U.S. Trustee Andrew Vara filed a brief on behalf of the Justice Department, supporting the talcum powder plaintiffs’ position that the bankruptcy filing should not be allowed to continue, indicating that the “misuse of the bankruptcy system is an issue of substantial importance” to his office.

The court’s decision could have far-reaching implications, as legal experts have noted more and more companies are using the “Texas Two-Step” tactic to avoid liability costs by forcing claims through the U.S. bankruptcy process, instead of proceeding through the civil justice system where a jury can determine how much is owed.

Johnson & Johnson Talcum Powder Lawsuit Update

The Johnson & Johnson talc powder bankruptcy scheme has been widely criticized by plaintiffs lawyers, as well as bankruptcy experts, as an abuse of the legal process and effort to delay a series of trials that were expected to go before juries this year.

Talcum powder plaintiffs say Johnson & Johnson, which has billions in cash reserves, has no financial distress that would merit a bankruptcy filing. However, if the bankruptcy is allowed to move forward, settlements for talcum powder cancer and asbestos lawsuits may be artificially capped.

Defending against the talc ovarian cancer claims has already cost Johnson & Johnson $1 billion, on top of Baby Powder settlements and verdicts that have amounted to another $3.5 billion, according to the bankruptcy filing.

On August 11, Johnson & Johnson Consumer Health announced plans to stop using talcum powder globally in its Baby Powder next year. Despite its plans, which include a switch to cornstarch-based powdered cosmetic products, the company continued to defend the safety of its talc-based powder products in the statement.

The Third Circuit is expected to hand down a decision sometime next month. Plaintiffs’ attorneys representing tens of thousands of women say if the court rules in favor of Johnson & Johnson, they plan to take the case to the U.S. Supreme Court.