Cancer victims who blame their malignant mesothelioma and ovarian cancer on exposure to asbestos-contaminated talc in Johnson & Johnson’s Baby Powder won a massive court victory this week. A federal appeals court in Philadelphia rejected the company’s use of a controversial legal maneuver that had first transferred their talc liabilities into a newly formed company that they then placed into Chapter 11 bankruptcy.
Court Rejects “Texas Two-Step” Strategy for Managing Mesothelioma Claims
It’s been over a year since Johnson & Johnson, facing 40,000 mesothelioma and ovarian cancer claims, engaged in a controversial bankruptcy strategy referred to as a Texas Two-Step. The company first formed a subsidiary called LTL Management specifically for the talc claims, then filed for bankruptcy protection. Bankruptcy experts and victims have closely watched the case, which has delayed court hearings for plaintiffs and set a precedent for similar actions by other companies facing litigation.
Prior to the bankruptcy filing, Johnson & Johnson had already been ordered to pay more than $4.5 billion in compensation to mesothelioma and ovarian cancer victims who accused the company’s iconic product of failing to warn of the dangers posed by talc. Johnson & Johnson’s outstanding talc liabilities have been estimated at between $8 billion and $10 billion.
Appeals Court Overrules Bankruptcy Court in Talc Claim Bankruptcy Decision
Despite the objections of mesothelioma and ovarian cancer victims, a bankruptcy court judge had permitted Johnson & Johnson to apply their strategy: he’d agreed that the filing had been conducted in good faith and that it would help to resolve the outstanding lawsuits. But on appeal, the Third Circuit panel in Philadelphia rejected that notion.
Writing for the court, Judge Thomas Ambro said that the newly-formed subsidiary had been “highly solvent” based on its funding agreement with Johnson & Johnson’s, and that the capital that was available – approximately $61.5 billion – was more than sufficient to address its potential liabilities. He said that permitting the use of the strategy “would allow tunnel vision to create a legal blind spot.” The decision gives hope of justice to thousands of victims and their families.
If you or someone that you love has been diagnosed with mesothelioma, ovarian cancer, or any other asbestos or talc-based cancer, the Patient Advocates at Mesothelioma.net can help. Contact us today at 1-800-692-8608 to learn more.
