J&J subsidiary can proceed with bankruptcy, staying lawsuits

Johnson & Johnson can proceed with Chapter 11 bankruptcy proceedings for its new subsidiary, LTL Management LLC, a judge ruled Friday, meaning lawsuits by some 38,000 people alleging asbestos in J&J's baby powder caused ovarian cancer and mesothelioma will have their stays extended until June 29.

Chief Judge of the New Jersey Bankruptcy Court Michael B. Kaplan acknowledged that plaintiffs in the baby powder lawsuits would feel frustrated and could lose their chance to seek relief from J&J.

"The court is aware that its decision today will be met with much angst and concern. The court remains steadfast in its belief that justice will best be served by expeditiously providing critical compensation through a court-supervised, fair, and less costly settlement trust arrangement," Kaplan wrote, expressing his belief that bankruptcy would be a better path for plaintiffs to find relief.

Kaplan concluded that both sides taking smaller steps toward mediation and plan formation would ensure good faith. LTL Management LLC v. Those parties listed on Appendix A to complaint, 21-30589, (N.J. Bankruptcy Ct., filed Oct. 14, 2021).

Kaplan also addressed concerns about time, saying, "The court understands that all sides are pointing fingers and suggesting that their adversaries will take advantage of these shorter periods of review and will endeavor to 'run out the clock.' Let's be clear, the only clock of import sits on the court's desk in chambers and shows 1,869 days until retirement. The court is confident that it can outlast either side's efforts to slow-walk the proceedings and will not countenance such conduct."

The issue at hand is J&J's formation of LTL and the assignment of all legal liability J&J had from lawsuits to the new subsidiary. As a result, consumers cannot seek relief from J&J and must seek it from LTL instead. J&J petitioned to freeze all the pending individual baby powder lawsuits while LTL's bankruptcy is proceeding.

According to Kaplan's decision, "The alleged purpose of this restructuring was to 'globally resolve talc-related claims through a Chapter 11 reorganization without subjecting the entire Old JJCI enterprise to a bankruptcy proceeding.'"

At the same time, J&J filed an instant motion requesting a preliminary injunction to enjoin the lawsuits against it because liability had transferred to LTL. On Nov. 10, Bankruptcy Judge Craig of the District of North Carolina granted J & J's motion, putting in place the initial stay of 60 days. Kaplan lengthened this stay to 120 days after concluding unusual circumstances warranted the extension.