Third Circuit Strikes Down Johnson & Johnson’s Bankruptcy Plan
On January 30, 2023, the Third Circuit Court of Appeals overturned Johnson & Johnson’s (J&J’s) attempt to avoid liability in over 38,000 talc-ovarian cancer and mesothelioma cases. Although a Third Circuit decision, this tactic has been a key to many large corporations’ efforts to avoid liability in large mass torts or class action cases. Instead of litigating a case to finality, J&J sought to file for bankruptcy with its subsidiary LTL formed with J&J’s talc interests, which it then underfunded but sought bankruptcy protection.
In overturning the bankruptcy plan, the Third Circuit found that the bankruptcy plan was not filed in good faith. The resulting relief came when the federal bankruptcy rulings supporting J&J’s injunction were reversed that had prevented plaintiffs’ cases from moving forward for months. Although J&J has vowed to fight to the end, J&J’s actions have caught the attention of Congress where hearings have been held and will continue to examine use of the bankruptcy process in this manner.
