Cancer victims urge court to end J&J bankruptcy hurdle to lawsuit

Sept 19 (Reuters) – People suing Johnson & Johnson over the company’s talc products urged an appeals court on Monday to revive their claims, saying the profitable company should not be allowed to use a subsidiary in bankruptcy to block lawsuits alleging the products cause cancer.

They asked a panel of the Philadelphia-based US 3rd Circuit Court of Appeals to dismiss the bankruptcy of J&J subsidiary LTL Management, saying LTL is a “concocted” company created solely for prevent them from getting their day in court.

J&J (JNJ.N), which maintains its talc products are safe, spun off LTL in October, handed over its talc responsibilities to it and filed the newly created subsidiary into bankruptcy days later.

This restructuring strategy, known as “Texas Two-Step,” halted approximately 38,000 lawsuits J&J faced alleging its baby powder and other talc 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.

Circuit Judge Julio Fuentes, during oral argument on Monday, asked cancer victims’ attorney Jeffrey Lamken if the bankruptcy court could provide more efficient resolution of claims than trying cases one by one in front of a court. other courts.

Lamken said the court shouldn’t make a blanket ruling on whether bankruptcy is “better” because its protections should be reserved for companies in financial difficulty and needing to reorganize.

He argued that cancer victims should be allowed to sue because bankruptcy requires an overall settlement to be reached through a lengthy court process before an individual case can be settled. LTL is under no pressure to act quickly because it has no operations and faces no penalties for remaining bankrupt, Lamken said.

David Frederick, representing a separate group of cancer plaintiffs, said bankruptcy allows LTL to pay “less money, slower”.

“Not a penny will be paid until the last call from the last naysayer is resolved,” Frederick said.

But J&J countered that bankruptcy court allows all current and future talc-related lawsuits to be settled together, which it says is the quickest and fairest way.

Litigation in other courts creates a wide variety of outcomes. Some plaintiffs will hit home runs and win big verdicts, while ‘most people won’t even get a turn at bat’, some will die before their cases go to trial, says LTL attorney Neal Katyal .

Perpetual litigation also creates significant “dead weight” in attorney fees and court costs, Katyal said.

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

Prior to filing for bankruptcy, J&J was facing costs of $3.5 billion in verdicts and settlements, including one in which 22 women won a judgment for more than $2 billion, according to bankruptcy court records.

But more than 1,500 talc lawsuits have been dismissed without J&J paying anything, and the majority of the cases that have gone to trial have resulted in defense verdicts, mistrials, or judgments for the company in appeal, according to LTL court documents.

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

In refusing to dismiss the case, Kaplan said the bankruptcy court is better equipped to handle mass tort litigation than other courts.

Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Sam Holmes

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