J&J talc cancer plaintiffs want 6-month ban on further bankruptcy filings

By Dietrich Knauth

NEW YORK (Reuters) - Lawyers for thousands of people who claim Johnson & Johnson (NYSE:JNJ)'s talc-based powders caused them to develop cancer on Wednesday urged a U.S. judge to temporarily block the company from seeking bankruptcy protection for a third time for its talc subsidiary.

J&J's attempt at resolving thousands of cancer lawsuits in bankruptcy court stumbled for a second time last week, when a judge ruled that the talc subsidiary, LTL Management, was not in the kind of immediate financial distress necessary to trigger bankruptcy protection.

While J&J intends to appeal that ruling, cancer claimants and the U.S. Department of Justice's bankruptcy watchdog asked U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey, to block the company from filing for bankruptcy a third time for at least 180 days.

LTL's bankruptcy proceedings have largely paused the 38,000 lawsuits against J&J, although one case was allowed to proceed to a $18.8 million verdict in July. J&J has said its talc products are safe and do not contain asbestos.

During a Wednesday court hearing, LTL attorney Greg Gordon countered that the company would "strongly resist" any request to "pre-judge" a potential future bankruptcy before it could be filed.

But David Molton, an attorney for the official committee representing cancer claimants in LTL's bankruptcy, said that a temporary prohibition on new bankruptcy filings was appropriate, given LTL's repeated bankruptcy filings.

Kaplan, who dismissed LTL's second bankruptcy, said he was not inclined to block future bankruptcy filings because circumstances could change in the next six months. "I just don't have a crystal ball," Kaplan said.

But the judge said he was open to further written arguments on that point before issuing a formal decision closing LTL's second bankruptcy case next week.

J&J's first bankruptcy gambit began in 2021, when it offloaded its talc liabilities into a new company via a corporate division known as a "Texas two-step" and immediately placed the new company into bankruptcy.

LTL's first bankruptcy was dismissed in April after a U.S. appeals court ruled that it was not in sufficient financial distress to be eligible for bankruptcy protection.

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LTL's second effort, premised on a proposed $8.9 billion settlement of current and future talc lawsuits, met the same fate after Kaplan ruled that the company was still not in the kind of "immediate" distress required by the appellate court's ruling.