US judge rules in favor of J&J in controversial 'Texas two-step' case
Johnson & Johnson celebrated a win in bankruptcy court on Friday, with a US judge ruling in favor of its controversial Chapter 11 filing meant to settle 38,000 lawsuits alleging its talc-based products caused cancer.
The trial stems back to a mountain of claims that J&J’s widely-used baby powder and other talc products contained asbestos and caused mesothelioma and ovarian cancer. In an attempt to dig itself out, the pharma giant spun the liabilities into a separate company called LTL Management and filed for bankruptcy back in October. But a couple of weeks ago, plaintiffs kicked off a five-day trial seeking to dismiss the bankruptcy case as misuse of the Chapter 11 system.

Judge Michael Kaplan of New Jersey rejected those motions, adding that “the filing of a chapter 11 case 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.”
While J&J touts the decision as a “positive development and step forward,” others are firing back. Jon Ruckdeschel, an attorney who’s litigated mesothelioma and other asbestos cases for 20 years (including against J&J), said in a statement that the decision keeps victims from their right to a jury decision.
“The bankruptcy code was never intended to be abused in this way by massively profitable corporations as a means to delay or prevent cancer victims from having their day in court,” he said. “We are disappointed that J&J’s stooge ‘bankruptcy’ filing for its fall-guy subsidiary LTL Management was not dismissed, but this matter will be appealed and other remedies will be sought against LTL and J&J as part of the bankruptcy proceeding in the meantime.”

To spin off its liabilities, J&J invoked a Texas law formally known as a divisional merger but colloquially called a “Texas two-step” bankruptcy. The pharma giant said in October that it had racked up about $3.5 billion in payments for settlements and verdicts — and during the trial, it claimed that from January 2020 to now, it’s been served on average with one or more ovarian cancer complaints every hour of every day.
Meanwhile, those on the claimants’ side — including a group of law professors who filed a “friend of the court” brief — argue that the Texas two-step move is a “direct attack on the fundamental integrity of the Chapter 11 system.”
Only a handful of talc-related suits have made it to trial and been resolved over the last decade — and though J&J says it has prevailed in a majority of cases, it’s also experienced some stinging losses including a Missouri case in 2018 when a jury awarded plaintiffs more than $4.7 billion in damages.
J&J maintains that it “never manufactured a product that contained asbestos,” and that its talc products are safe. The pharma giant stopped manufacturing the talc-based powder in May 2020 but cited declining sales as its reasoning.
“LTL stands ready to work with claimants’ counsel and the mediator to reach an equitable and efficient resolution as ordered by the Bankruptcy Court,” the company said in a statement on Friday.
Kaplan noted in his opinion that “many of these cancer victims will not live to see their cases through the trial and appellate systems, but certainly deserve the comfort in knowing that their families’ financial needs will be addressed timely.”
“The Court is aware that its decision today will be met with much angst and concern,” he wrote. “Nonetheless, the matter before the Court is so much more than an academic exercise or public policy debate. These issues impact real lives.”