Cancer victims are asking the court to block J&J from filing for bankruptcy

Cancer victims are asking the court to block J&J from filing for bankruptcy
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Sept 19 (Reuters) – People suing Johnson & Johnson over the company’s talc products urged an appeals court on Monday to reinstate their lawsuit, saying the profitable company should not be allowed to use a bankrupt subsidiary to block lawsuits alleging the products cause cancer. he said.

They asked a panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia to dismiss J&J’s subsidiary LTL Management from bankruptcy, saying LTL was a “fictitious” corporation created solely to stop them from having their day in court.

J&J (JNJ.N)Safeguarding Talc Products, liquidated LTL in October, assigned the talc liabilities to it, and filed for bankruptcy of the newly created subsidiary days later.

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This restructuring strategy, known as the “Texas two-step,” ended nearly 38,000 lawsuits filed by J&J alleging that baby powder and other talc-based products contained asbestos and caused mesothelioma and ovarian cancer.

Critics, including lawmakers and legal experts, say J&J’s bankruptcy maneuver could provide a blueprint for other big companies to avoid juries in mass tort lawsuits.

In Monday’s arguments, Circuit Judge Julio Fuentes asked Jeffrey Lamken, a lawyer for cancer victims, whether bankruptcy court would be more efficient than filing claims in other courts one at a time.

Lamken said the court should not make a blanket ruling on whether bankruptcy is “better” because its protections should be reserved for companies that are in financial distress and need to reorganize.

He argued that cancer victims should be allowed to sue because bankruptcy requires that any individual case be dealt with thoroughly through a lengthy court process before it can be settled. Lamken said LTL is under no pressure to move quickly because it has no operations and faces no penalty from bankruptcy.

David Frederick, who represents a separate group of cancer plaintiffs, said the bankruptcy allows LTL to pay “less money, more slowly.”

“Not a single penny will be paid until the final appeal of the last protester is resolved,” Frederick said.

But J&J opposed the bankruptcy court, allowing all current and future talc claims to be settled together, which is the fastest and fairest way.

Litigation in other courts produces very different results. LTL attorney Neal Katyal said that while some plaintiffs will run home and win large verdicts, while others die before their cases go to trial, “most people won’t even get a turn at bat.”

Continued litigation also creates significant “dead weight” in attorneys’ fees and court costs, Katyal said.

The company has set aside $2 billion to settle the talc lawsuits, which LTL executives described as a starting point rather than a “cap.”

Before the bankruptcy filing, J&J faced $3.5 billion in judgments and settlements, including one in which 22 women were awarded more than $2 billion in judgments, according to bankruptcy court records.

But more than 1,500 talc lawsuits were dismissed by J&J without payment, and most of the cases that went to trial resulted in defense verdicts, mistrials or judgments for the company on appeal, according to LTL’s court filings.

Cancer victims are asking an appeals court to overturn a New Jersey bankruptcy judge who allowed LTL’s bankruptcy to proceed. LTL’s bankruptcy filing automatically halted claims against it, and U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey, ruled in February that LTL’s bankruptcy halted claims against parent company J&J.

Kaplan declined to dismiss the case, saying the bankruptcy court is better equipped to handle mass tort claims than other courts.

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Reporting by Dietrich Knauth Editing by Alexia Garamfalvi and Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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