Johnson & Johnson is one of the largest consumer health companies in the world. Headquartered in New Brunswick, New Jersey, it has almost 145,000 employees and saw revenue of over $93 billion in 2021.
In 2009, a physician’s assistant from Sioux Falls, South Dakota, filed a lawsuit against the company when she got diagnosed with ovarian cancer. The product in question is the company’s popular talcum baby powder.
From 2009 to 2013, 40,000 lawsuits were filed against the consumer health giant. The plaintiffs accused the company of selling baby powder that contained asbestos, a widely-known carcinogen.
The product was tested in October 2019, and the Food & Drug Administration found the powder contained asbestos. The plaintiffs in this class action lawsuit had to meet specific criteria to be counted among those that could bring suit against the company.
First, they had to use the product in question: the baby powder Johnson & Johnson had always deemed safe. Second, from 2000 to the present, they had to have been diagnosed with ovarian cancer. Biopsies of the cancer were said to help link results to the baby powder. And third, plaintiffs had to be at least 22 years of age but no older than 65, with the diagnosis being between ages 22 and 64.
Several trials were held, the first was in 2017 when a Los Angeles County Superior Court awarded plaintiffs in the case $417 million. In a subsequent trial in July 2018, 22 plaintiffs came forward, resulting in a nearly $4.7 billion ruling in Missouri. However, the Missouri Court of Appeals later reduced that amount to $2.12 billion.
After the awards were determined Johnson & Johnson created a new company, LTL Management. The liability for each of the lawsuits were moved under LTL Management per the “Texas Two-Step” bankruptcy rules.
What Is a Texas Two-Step Bankruptcy?
A Texas Two-Step bankruptcy allows corporations to create new companies where they can assign or transfer outstanding tort liabilities. The newly formed company then files for bankruptcy, shielding the original company from costs associated with those tort liabilities.
With mounting lawsuits, Johnson & Johnson leveraged the Texas Two-Step bankruptcy and created a new company in Texas, known to be business-friendly in corporate law. LTL Management then assumed all of Johnson & Johnson’s tort liabilities and immediately filed for Chapter 11 bankruptcy. This move halted any further action regarding the baby powder lawsuits.
The Latest News on the Johnson & Johnson Case
The bankruptcy filing by LTL was challenged on September 26 before a panel of three judges in the United States Court of Appeals for the Third Circuit in Philadelphia.
Although the court did not decide at the time, a ruling is expected before the end of the year. However, regardless of that ruling, it’s unlikely the case will end there.
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