A federal appeals court has agreed to hear appeals from asbestos victims trying to end the bankruptcy of a Johnson & Johnson spin-off that was filed to limit the giant’s tort liability health with regard to its talc products.
The four appeals that the United States Court of Appeals for the Third Circuit OK Wednesday to Consider will include a review of a New Jersey bankruptcy court’s decision earlier this year that denied the tort plaintiffs’ motion to dismiss the Chapter 11 case that was filed by the J&J unit. which was created, LTL Management LLC.
The tort plaintiffs argue that the bankruptcy of LTL Management – which was created to house and process lawsuits brought by its users of talc products who allege they developed cancer – was filed in bad faith.
The Third Circuit will also consider plaintiffs’ appeals against a ruling by Judge Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey to grant a preliminary injunction restraining them from suing nondebtor defendants, including J&J.
Appeals from a bankruptcy judge’s decision are usually first brought to a district court judge. But Kaplan said the issues surrounding LTL’s bankruptcy were significant enough to certify directly to the circuit court.
J&J, a New Brunswick, New Jersey-based healthcare giant, is facing a wave of lawsuits from consumers who claim they developed ovarian cancer or mesothelioma after using its baby powder and its talc products which allegedly contain asbestos.
The case was pushed back due to J&J’s use of the corporate strategy known as Texas Two-Step, which involves a company spinning off a unit and shifting its tort liability to that entity. .
J&J transferred its legal responsibility to LTL in October 2021 and the spin-off unit filed Chapter 11 within days of the transfer. The move has been criticized by plaintiffs, lawmakers and others who say it was an abuse of the bankruptcy process.
The cases are In re: LTL Management LLC, cir. 3d. App., nos. 22-8015, 22-8016, 22-8020, 22-8021, decisions 5/11/22.