A federal appeals court upended Johnson's plan to resolve thousands of lawsuits from consumers who claim the company's talc products cause cancer.
The Third Circuit U.S. Court of Appeals dismissed the Chapter 11 petition for LTL Management LLC, the spinoff J&J created, assigned its talc claims to and was immediately placed in bankruptcy in October 2021.
J&J maintains that its talc-based products are safe and do not cause cancer, but it has said it moved the 38,000+ claims against it into the LLC as a way to handle the cases more efficiently than through individual trials.
The bankruptcy was dismissed in good faith and was unanimously agreed by the three-judge panel. The court wrote in its opinion that good intentions do not suffice alone if you want to protect the J&J brand or resolve litigation. The Bankruptcy Code's safe harbor is used to meet its intended purposes. A putative debtor in financial distress can't do so. In 2020, the consumer-goods giant announced that it would stop selling talc Baby Powder in the U.S. and Canada, saying demand had fallen due to misleading information regarding the product's safety. J&J said last summer that it would stop selling talc-based baby powder in the world starting in 2023 and will switch to an entirely cornstarch-based line.
The consumer lawsuits claim that J&J's talc products caused cancer due to contamination with asbestos, a known carcinogen. J&J denies those allegations, and has said decades of scientific testing and regulatory approvals have shown it is safe and that the product does not contain asbestos and does not cause cancer.