A US ap­peals court has ruled against John­son & John­son’s use of bank­rupt­cy to deal with mount­ing talc law­suits, de­cid­ing that do­ing so would “cre­ate a le­gal blind spot.”

The Third Cir­cuit Court of Ap­peals re­versed a pre­vi­ous bank­rupt­cy court de­ci­sion on Mon­day, call­ing for the dis­missal of a Chap­ter 11 fil­ing by J&J’s sub­sidiary LTL Man­age­ment.

Faced with more than 38,000 law­suits al­leg­ing its talc-based prod­ucts caused can­cer, J&J spun its talc li­a­bil­i­ties in­to a sep­a­rate com­pa­ny called LTL Man­age­ment back in Oc­to­ber 2021 and filed for bank­rupt­cy, a con­tro­ver­sial move col­lo­qui­al­ly re­ferred to as a “Texas two-step” bank­rupt­cy. Claimants ar­gued that the strat­e­gy is a mis­use of the US bank­rupt­cy code — and on Mon­day, a pan­el of judges agreed.

“For here the debtor was in no fi­nan­cial dis­tress when it sought Chap­ter 11 pro­tec­tion. To ig­nore a par­ent (and grand­par­ent) safe­ty net shield­ing all li­a­bil­i­ty then fore­seen would al­low tun­nel vi­sion to cre­ate a le­gal blind spot. We will not do so,” the court’s opin­ion reads.

J&J’s ba­by pow­der prod­ucts were first sold in 1984, and have been used by hun­dreds of mil­lions of peo­ple. Ques­tions about whether the pow­der con­tained as­bestos first arose back in the 1970s, al­though J&J main­tains that it has “nev­er man­u­fac­tured a prod­uct that con­tained as­bestos.” Up un­til 2010, there were a “small num­ber of iso­lat­ed claims” that the talc prod­ucts caused con­di­tions such as mesothe­lioma and rash­es, ac­cord­ing to court doc­u­ments.

How­ev­er, two ju­ry ver­dicts for plain­tiffs in 2013 and 2016 “ush­ered in a wave of law­suits” al­leg­ing the prod­ucts caused mesothe­lioma and ovar­i­an can­cer. By the time LTL Man­age­ment filed for bank­rupt­cy, there were more than 38,000 ovar­i­an can­cer claims against it.

J&J stopped man­u­fac­tur­ing its talc prod­ucts in the US in 2020, cit­ing de­clin­ing sales caused by “changes in con­sumer habits and fu­eled by mis­in­for­ma­tion around the safe­ty of the prod­uct.” The com­pa­ny said it would change the for­mu­la of its ba­by pow­der prod­ucts this past Au­gust, while main­tain­ing that its talc-based pow­der is “safe, does not con­tain as­bestos and does not cause can­cer.”

An ap­peals court agreed to re­vis­it the bank­rupt­cy case in May. J&J pre­vi­ous­ly promised that all talc prod­ucts would be dis­con­tin­ued glob­al­ly by 2023.

“The Third Cir­cuit’s de­ci­sion is a point-by-point re­jec­tion of J&J’s at­tempt to per­vert the bank­rupt­cy sys­tem and tram­ple the Con­sti­tu­tion­al right to a ju­ry tri­al of all Amer­i­cans harmed by dead­ly prod­ucts,” Jonathan Ruck­de­schel, a lawyer rep­re­sent­ing mesothe­lioma claimants in a class ac­tion suit, said in a state­ment. “The Third Cir­cuit’s de­ci­sion re­in­forces that the Bank­rupt­cy sys­tem is not a tool for the wealthy, no mat­ter how many tens of mil­lions of dol­lars they are will­ing to pay lawyers.”

Mean­while, J&J de­fend­ed its strat­e­gy, claim­ing in a state­ment to End­points News that LTL “ini­ti­at­ed this process in good faith and our ob­jec­tive has al­ways been to eq­ui­tably re­solve claims re­lat­ed to the Com­pa­ny’s cos­met­ic talc lit­i­ga­tion.”

“To­day’s rul­ing does not re­flect the facts es­tab­lished dur­ing the Bank­rupt­cy Court’s tri­al re­gard­ing the ap­pro­pri­ate­ness of LTL’s for­ma­tion and fil­ing, nor the Com­pa­ny’s in­ten­tion to ef­fi­cient­ly re­solve the cos­met­ic talc lit­i­ga­tion for the ben­e­fit of all par­ties, in­clud­ing cur­rent and fu­ture claimants,” the com­pa­ny said, adding that it will chal­lenge the lat­est rul­ing.

If the full pan­el of judges de­ny J&J’s chal­lenge, the com­pa­ny can pe­ti­tion the Supreme Court, ac­cord­ing to a Bloomberg re­port. End­points has re­quest more in­for­ma­tion from J&J, and will up­date the sto­ry ac­cord­ing­ly.

In Oc­to­ber 2021, the phar­ma gi­ant said it had racked up near­ly $1 bil­lion in de­fense costs, and $3.5 bil­lion in pay­ments for set­tle­ments and ver­dicts. J&J ar­gued those costs were un­ten­able, and that a Chap­ter 11 was need­ed to “ap­pro­pri­ate­ly as­sess, re­solve, and ad­min­is­ter these claims in an ef­fi­cient and eq­ui­table man­ner.”

John­son & John­son’s stock $JNJ was down more than 3.3% on Mon­day af­ter­noon, trad­ing at around $162.61 per share.

A California judge will allow a plaintiff in a state court case to introduce expert testimony connecting a potential carcinogen in former blockbuster medicine Zantac to cancer.

The order was handed down on Thursday from state judge Evelio Grillo, who is now allowing both parties to introduce expert testimony in an upcoming trial after what’s known as a Sargon hearing, where a judge determines the admissibility of expert witnesses and expert opinions.

Abbott is renewing its concussion awareness campaign, weeks after the company received FDA clearance for its lab-based traumatic brain injury (TBI) blood test.

The unbranded campaign features three generations of the Melon family — animated talking melons who slip on toys or take a spill while playing pickleball.

“Don’t mess with your melon. If you hit it, get it checked,” a narrator says.