J&J's 'Texas two-step' talc bankruptcy case heads back to appeals court – Endpoints News

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 caused mesothe­lioma and ovar­i­an can­cer.
Judge Michael Ka­plan of New Jer­sey, where J&J is head­quar­tered, sided with J&J in the bank­rupt­cy case, who said at the time J&J’s fil­ing “with the ex­pressed aim of ad­dress­ing the present and fu­ture li­a­bil­i­ties as­so­ci­at­ed with on­go­ing glob­al per­son­al in­jury claims to pre­serve cor­po­rate val­ue is un­ques­tion­ably a prop­er pur­pose un­der the Bank­rupt­cy Code.”
How­ev­er, Ka­plan lat­er grant­ed ex­pe­dit­ed ap­peal to the case, al­low­ing it to skip dis­trict courts and head di­rect­ly to the 3rd US Cir­cuit Court of Ap­peals, which has now agreed to re­view the case.
J&J stopped sell­ing its ba­by pow­der in 2020, though the megaphar­ma said it was due to de­clin­ing sales. The com­pa­ny has main­tained that its icon­ic talc prod­ucts do not con­tain as­bestos.
The phar­ma is al­so fac­ing a sep­a­rate law­suit in New Jer­sey from the fam­i­ly of a for­mer work­er that al­leges the com­pa­ny hid ev­i­dence of the pres­ence of as­bestos at a for­mer J&J sub­sidiary. In that case, Ka­plan ruled that J&J’s bank­rupt­cy fil­ing did not ap­ply.
The mesothe­lioma claimants com­mit­tee de­clined to com­ment on the ap­peals up­date. John­son & John­son did not re­spond to a re­quest for com­ment be­fore pub­li­ca­tion.
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Biotech indexes may be down, but both Snedeker and Otello Stampacchia, Ph.D., Founder and Managing Director of Omega Funds, see opportunities in the market. In Snedeker’s opinion, investors need to seek out companies with the potential for meaningful revenue growth, particularly those that are mispriced in the current bear market.
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Three generic drugmakers have ceased operations immediately, as their holding company has enlisted a consulting firm to oversee the process of administration as 1,000 employees lose their jobs.
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Roche is ending the week with another dispiriting setback to reflect on.
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Bristol Myers Squibb’s manufacturing facility in East Syracuse, NY, is about to be swallowed up by one of the largest conglomerates in South Korea.
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