Lawyer pointing and smacking gavel
May 9, 2023

Judge Orders Johnson & Johnson to Begin Discussing Damages.

After a second attempt at filing bankruptcy to avoid compensating cancer victims of its talc-based baby powder, U.S. Bankruptcy Judge Michael Kaplan has ordered Johnson & Johnson to begin discussing settlements with lawyers after the pharmaceutical giant’s proposed $8.9 billion offer was rejected. The opposing parties appeared in Trenton, New Jersey to discuss whether the second bankruptcy case should or should not continue. 

WHY IS JOHNSON & JOHNSON TRYING TO FILE FOR BANKRUPTCY?

Johnson & Johnson’s second Chapter 11 filing comes only a few months after a federal appeals court voted unanimously in January 2023 to reject the mega-corporation’s attempt at merging around 40,000 talcum powder lawsuits into its new subsidiary, LTL Management, LLC. The subsidiary was created in 2021, right before J&J made its first attempt to file for bankruptcy.

By splitting itself into two companies— a strategy known legally as the “Texas Two-Step,” because Texas is the only state in the U.S. that allows such a maneuver— J&J hoped that filing for Chapter 11 bankruptcy after dumping its ongoing lawsuits into its new subsidiary would allow the corporation to claim that it lacks the funding to pay out settlements. The bankruptcy court dismissed this strategy, stating that LTL Management cannot file for bankruptcy because it isn’t in any actual financial distress.

GOING FORWARD

On May 4, Judge Kaplan scheduled a June hearing to determine the state of Johnson & Johnson’s bankruptcy claim. He is anticipated to reject LTL Management’s filing once again for the same reason the first attempt was dismissed: neither of J&J’s companies appear to be under legitimate financial distress. A few days after scheduling the June hearing, he instructed the opposing parties to participate in another settlement negotiation session, along with two co-mediators appointed by the court to resolve any issues that occur during discussion.

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