Judge allows law professors to weigh in on J&J bankruptcy

A New Jersey Bankruptcy judge said UC Berkeley School of Law Dean Erwin Chemerinsky and other law professors can file amicus briefs to dismiss a bankruptcy filed by Johnson & Johnson and its shell company LTL Management, whose only purpose is to hold liabilities from the national talc powder litigation.

After an hour and a half hearing Thursday, U.S. Bankruptcy Judge Michael B. Kaplan gave Chemerinsky and a group of seven law professors who called LTL's bankruptcy a "blatant abuse" of the bankruptcy system, the go ahead to file amicus briefs. Bankruptcy Professor Robert K. Rasmussen of USC Gould School of Law, one of the seven, said Kaplan should exercise his discretion and dismiss LTL's bankruptcy petition because it threatens the integrity of the bankruptcy system.

"This case is a flagrant attempt by J&J to abuse benefits granted to legitimate debtors by the Bankruptcy Code while evading its rules and requirements," the professors said in an amicus memorandum. "Accordingly, and especially because other entities have already used this inappropriate strategy to take advantage of the Bankruptcy Code, the Court should not rubber stamp J&J's bad faith attempt to outmaneuver the good faith standard.

While the New Jersey bankruptcy court does not have a specific bankruptcy code provision or rule governing the filing of amicus briefs, it has frequently allowed it, the professors said.

"The Amici Professors, having dedicated their careers to the study of bankruptcy law, possess unique, specialized knowledge that will lend critical context to the Court in determining the pending Motion to Dismiss," the professors said.

The professors support a group of lawyers representing talc claimants who say if the bankruptcy petition is not thrown out, thousands of cancer victims will be robbed of "their day in court."

J&J faces 38,000 lawsuits consolidated in California and New Jersey, claiming the company's baby powder contains asbestos and causes ovarian cancer and mesothelioma. The pharmaceutical giant has for years denied its products cause cancer and said it has won the majority of cosmetic talc-related jury trials.

After losing a number of significant jury trials in 2021, J&J in October announced the creation and the bankruptcy of its new liability-holding subsidiary, LTL.

Using a Texas divisive-merger statute, J&J dissolved one of its baby powder-making subsidiaries and two days later, created two new companies: Johnson & Johnson Consumer Inc. and LTL. All the debts and liabilities from the talcum powder litigation went into LTL management, and the new J&J CI continued operating as usual, according to J&J's state plan. In re: LTL Management LLC, 21-30589 (W.D. N. Carolina Bankruptcy Ct., filed Oct. 14, 2021).

LTL's bankruptcy has attracted criticism from lawmakers such Elizabeth Warren, D-Mass, who say J&J is attempting to evade accountability for harm caused by its products.