J&J accused by U.S., of misusing bankruptcy to end talc cancer suits

Johnson & Johnson should not be allowed to use a small unit's bankruptcy case to end tens of thousands of cancer lawsuits because the strategy is rooted in bad faith, the U.S. Trustee said in a court filing.

The health-care products maker is trying for the second time to get itself "out of a jam as cheaply as possible," using the Chapter 11 filing of LTL Management, said the agency, which is an arm of the U.S. Justice Department. J&J created LTL in 2021 and made it responsible for resolving claims that tainted baby powder and similar products caused cancer.

In a Monday court filing, the U.S. Trustee joined a group of advocates for cancer victims who have asked a federal judge in New Jersey to dismiss the LTL bankruptcy case. J&J put LTL back into bankruptcy last month about two hours after the first LTL case was dismissed.

"In the weeks leading up to its second bankruptcy filing, LTL and its ultimate parent, Johnson & Johnson engaged in a series of transactions that LTL admits were designed for no purpose other than creating artificial 'financial distress'," the U.S. Trustee said in the filing.

J&J has an $8.9 billion settlement agreement with the "vast majority" of the law firms representing talc claimants, the company's head of litigation, Erik Haas said in an emailed statement. Should the bankruptcy survive and 75% of claimants vote in favor of the deal, all current and future talc suits would be settled.

"We are engaging in a legitimate and appropriate use of the bankruptcy process, and look forward to letting all the claimants vote on the proposed plan, which presents an equitable, efficient and complete resolution," Haas said.

J&J denies that its products cause cancer and has challenged claims that the talc it used in baby powder was contaminated with asbestos, a toxic industrial substance. The company has offered to pay $8.9 billion as part of LTL's new bankruptcy to resolve all current and future claims.

That proposal was negotiated with a group of lawyers who say they represent the majority of people with talc-related claims. Should the bankruptcy survive attempts to dismiss the case by the U.S. Trustee and holdout cancer victims, LTL would be free to push for a plan that forces all victims to resolve their claims through a trust funded by J&J instead of suing in courts across the country.

The company has said it needs Chapter 11 to resolve the talc liability, which continues to grow. John Kim, LTL's chief legal officer, has testified that the number of pending talc claims doubled between the time the second bankruptcy was filed in April and the J&J subsidiary first filed Chapter 11 in October 2021.

In a separate filing on Monday, a committee of talc claimants who have refused to join the $8.9 billion settlement asked a federal appeals court to immediately throw out the bankruptcy case or, at a minimum, to allow cancer victims to sue J&J while the Chapter 11 case goes forward.

The new bankruptcy filing is LTL Management LLC, 23-12825, U.S. Bankruptcy Court for the District of New Jersey (Trenton).