Judge to Decide if J&J Talcum Powder Lawsuits Can Proceed This Week

A halt in the litigation and the bankruptcy maneuver may pressure plaintiffs to negotiate the creation of a trust fund which is likely to pay out far less than they could win through trials and a settlement with J&J itself

Following a hearing on Friday, the federal judge presiding over the bankruptcy filing by a newly created Johnson & Johnson subsidiary says he will decide this week whether to put a hold on all ongoing talcum powder lawsuits.

More than 30,000 Baby Powder lawsuits and Shower-to-Shower lawsuits have been brought against Johnson & Johnson throughout the U.S. court system, each involving similar allegations that talc and asbestos particles in the products caused women to develop ovarian cancer, mesothelioma and other injuries.

In response to mounting litigation costs and a number of massive verdicts returned in early trial dates, Johnson & Johnson announced last month that it has spun off any liability exposure it faces from the litigation into a new company, LTL Management, LLC, which was formed for the express purpose of placing the new unit into bankruptcy, even though Johnson & Johnson itself has billions of dollars in assets on hand.

The Johnson & Johnson talcum powder bankruptcy plan has been widely criticized as nothing more than a negotiating tactic, which is intended to delay progress in thousands of lawsuits that are currently heading toward trial throughout the U.S. Court system. However, plaintiffs have strenuously opposed requests by the company to place a temporary stay on the litigation, indicating that any delay will have a detrimental effect on the judicial process.

U.S. Bankruptcy Judge Craig Whitley, in North Carolina, declined to immediately stay the litigation last month, and is now considering whether the bankruptcy case should be sent to Delaware or New Jersey bankruptcy courts. He has indicated he will decide if he will grant Johnson & Johnson’s stay request, and whether he will issue an injunction which will protect the company during LTL Management’s bankruptcy proceedings, this week after pausing a hearing held last Friday.

If the lawsuits are paused, legal experts say that will put pressure on plaintiffs to negotiate a deal involving the creation of a trust fund for victims, which some say will be far less than what they could likely win in a settlement with Johnson & Johnson if the lawsuits were to continue.

The controversial bankruptcy maneuver, which has become known as the “Texas Two-Step,” has been used by other companies facing asbestos claims to break off part of itself as a separate unit under Texas law, shuffle its liabilities into that new unit, and then declare bankruptcy, hoping it will only have to pay pennies on the dollar to get rid of the massive legal liabilities, without facing the full consequences of their corporate actions that resulted in injuries for plaintiffs.

Defending against the talcum powder litigation has cost Johnson & Johnson $1 billion, on top of settlements and verdicts that have amounted to another $3.5 billion, according to the bankruptcy filing.

Most of the U.S. talc litigation is currently pending in the federal court system, where the cases are centralized before U.S. District Judge Freda L. Wolfson in the District of New Jersey, as part of an MDL or multidistrict litigation, where plans are underway for the first in a series of talcum powder “bellwether” trials to begin in April 2022.