Johnson & Johnson’s talc liability unit failed to convince the Third Circuit to rehear a bid to revive its bankruptcy case, leaving a petition to the Supreme Court as the company’s last resort.
The US Court of Appeals for the Third Circuit’s Wednesday denial of LTL Management LLC’s motion for a rehearing leaves in place the court’s January ruling that LTL’s bankruptcy was improper because the company wasn’t financially distressed. LTL had asked for another three-judge panel hearing from the Third Circuit or a rehearing by the entire court.
J&J vowed to continue efforts to keep the bankruptcy case alive, saying in a statement Wednesday it will immediately ask to pause the Third Circuit’s order to dismiss the Chapter 11 case and seek review directly from the US Supreme Court.
Barring a reversal by the nation’s highest court, J&J will be left with a stinging legal defeat after creating LTL in 2021 to absorb its asbestos-related legal liabilities and putting the new unit into bankruptcy.
J&J had hoped to use the bankruptcy proceedings to consolidate and address about 40,000 claims that its baby powder and talc products caused cancer. Dismissal of the Chapter 11 would return those suits back to the civil tort system.
The New Jersey-based healthcare giant faced immense backlash from talc plaintiffs after moving their claims into the bankruptcy court and blocking their rights to go to trial or settle. The company said it would fund a victims’ trust worth at least $2 billion.
Judge Michael Kaplan of the US Bankruptcy Court for the District of New Jersey ruled last year that the LTL case was a legitimate use of the bankruptcy system and would yield more practical and efficient outcomes.
A three-judge panel for the Third Circuit overturned Kaplan’s decision in a closely watched appeal that could discourage other healthy companies from isolating mass tort liabilities into a specially-created subsidiary and shielding the parent company from further litigation.
“Today’s ruling ignores the facts established during the Bankruptcy Court’s trial regarding the appropriateness of LTL Management’s (LTL) formation and filing, as well as the Company’s intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants,” J&J said Wednesday.
The case is In re LTL Management LLC, 3d Cir., No. 22-02006, order issued 3/22/23.
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