J&J’s ‘Texas two-step’ talc bankruptcy case heads back to appeals court

In late February, Johnson & Johnson won a controversial case surrounding its bankruptcy filing designed to settle 38,000 lawsuits accusing its talc-based products of causing cancer. However, it appears that bankruptcy case is far from over as the US appeals court has now agreed to revisit that ruling.

The dispute stems from J&J’s use of a “Texas Two-step”: applying a law that enabled it to spin out its liabilities related to the ongoing talc lawsuits into a separate company. That company, known as LTL Management, then filed for bankruptcy — a move that shielded LTL (and therefore J&J) from further judicial action in the talc lawsuits.

The claimants in the case said that J&J’s moves are a misuse of the US bankruptcy code, though J&J maintained that previous companies have done the same.

The lawsuits allege that J&J’s widely-used baby powder and other talc-based products were contaminated with asbestos and…
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