Many cancer victims and advocates who hope to see more accountability put on Johnson & Johnson (J&J) for the injuries caused by the company’s talc baby powder are dismayed by a recent decision by a Houston judge. On October 10, U.S. Bankruptcy Judge Christopher Lopez announced he would allow a bankruptcy case involving Red River Talc, a new subsidiary of J&J, to stay in Texas.
This decision means that since Red River Talc is keeping its Chapter 11 bankruptcy filing in the Houston court, J&J will have a third opportunity to use a legal strategy, known as the Texas Two-Step. If J&J succeeds, thousands of talc baby powder lawsuits alleging its products caused cancer could be dismissed.
Opposing attorneys have argued that Red River Talc should not be eligible for bankruptcy protection due to the financial strength of the parent company. They had hoped the case would be dismissed or moved to New Jersey, where J&J is headquartered.
While Lopez acknowledged that J&J did attempt bankruptcy twice through another subsidiary, LTL Management, he made it clear that since this new filing has the support of many claimants, it should continue, and it can do so in Texas.
“I think this bankruptcy case is different,” Lopez said.
How J&J’s Baby Powder Legal Problems Began
For several decades, Johnson & Johnson marketed and sold talc-based baby powder. Research has shown that J&J’s talc baby powder was contaminated with asbestos, a mineral known to cause cancer. According to the American Cancer Society, talc has been associated with ovarian cancer, lung cancer, uterine cancer, stomach cancer, and pleural mesothelioma, as well as others.
By 2019, multiple investigations by media outlets revealed that leaders at J&J were aware of the asbestos in the talc baby powder. Still, despite this, the company continued to market and sell the products and failed to disclose the risks to consumers. As a result, consumers across the country who have used the products and been diagnosed with cancer began taking legal action by filing J&J baby powder lawsuits.
J&J is now facing lawsuits from over 62,000 plaintiffs who are seeking compensation for damages caused by the contamination ranging from medical expenses, lost wages, long-term care, and other financial needs
The Texas Two-Step Strategy
In 2021, J&J’s attempt to use the Texas Two-Step began when officials at the company created LTL Management and located it in Texas. After its creation, lawyers for the parent company moved the baby powder lawsuits to the new entity. LTL Management then relocated to North Carolina. Once there, the subsidiary of J&J filed for bankruptcy protection.
However, in January 2023, the bankruptcy filing was dismissed by the Third U.S. Circuit Court of Appeals in Philadelphia with the court determining that LTL Management was not in financial distress and had only been created to access the bankruptcy system.
LTL Management relocated again, this time to New Jersey, a state in the same jurisdiction where the Third Circuit resides, and tried again to refile for Chapter 11 protection.
In July 2023, the second attempt was dismissed by the U.S. Bankruptcy Judge Michael Kaplan who explained his decision was due to the fact that the talc lawsuits did not put LTL into immediate “financial distress.”
Another J&J Subsidiary Seeks Bankruptcy
It was on September 20, that the J&J subsidiary Red River Talc, attempted to seek bankruptcy protection in federal bankruptcy court. This time, lawyers representing Red River Talc/J&J included not only the settlement proposal with $9 billion earmarked for thousands of victims but also emphasized that they had approval from a large number of claimants. J&J lawyers had asked plaintiffs to vote on the deal ahead of time to show there was support and the company has stated that they have more than the 75 percent of votes needed for a bankruptcy judge to impose the deal on all plaintiffs.
Shortly after the filing, the U.S. Department of Justice’s Office of the U.S. Trustee and attorneys representing other talc baby powder claimants had urged Judge Kaplan, the New Jersey bankruptcy judge, to block the new action by J&J, but the judge did not.
Instead, Kaplan said in a September 24 court hearing that Houston bankruptcy judge Christopher Lopez was best positioned to decide whether the case should proceed in Texas or New Jersey. “I will not comment on the merits of the venue. That is for Judge Lopez to decide,” Kaplan said. “Good luck in Texas.”
Potential Influence of Purdue Pharma Bankruptcy Opioid Cases
Moving forward in the Red River Talc case, a recent decision by the U.S. Supreme Court concerning the bankruptcy of Purdue Pharma may play a part in the outcome.
In recent years, lawyers for Purdue Pharma have been handling lawsuits due to the drug company’s role in the United States’ opioid crisis, primarily over its misleading marketing of the drug Oxycontin.
Similar to J&J, the company leaders had attorneys file Chapter 11 to receive financial protection even though the company is financially solvent, and a bankruptcy settlement between claimants and Purdue Pharma was reached in September of 2021.
The settlement agreed upon gave the Sacklers, the owners and founders of the company, protection from civil lawsuits while Purdue Pharma would pay out over $6 billion in financial support to drug recovery programs in communities across the country. However, in June, the Supreme Court declared that the company could not use bankruptcy to shield its owners.
Justice Neil Gorsuch wrote for the majority, “The Sacklers seek greater relief than a bankruptcy discharge normally affords, as they aim to eliminate claims for wrongful death and fraud without fully disclosing their assets,” he said.
Purdue Pharma and Johnson & Johnson are financially strong companies battling thousands of lawsuits. And, both have a history of attempting the Texas Two-Step. With these similarities, there are some who believe there is potential for the Texas bankruptcy court to ultimately make a similar decision against Red River Talc and Johnson & Johnson that was made against Purdue Pharma and the Sacklers.
In the end, both companies may not be able to receive the protection found through bankruptcy.
