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Aug 26 (Reuters) – A US judge refused to prevent Johnson & Johnson (JNJ.N) from taking action to offload Baby Powder’s extended responsibilities from the rest of its operations, preserving the possibility for the healthcare company to move thousands of claims from people who used its talcum powder to a unit that would file for bankruptcy.
US bankruptcy judge Laurie Selber Silverstein rejected a request by plaintiffs’ lawyers to block the move Thursday evening. Lawyers for cancer victims wanted her to issue an injunction against J&J as part of her role overseeing the bankruptcy proceedings of one of the company’s former talc suppliers.
J&J is investigating a plan to transfer its responsibilities for widespread baby powder and other talc-related litigation to a newly formed company that would later seek bankruptcy protection, Reuters previously reported. The company’s talc products are currently housed at a subsidiary called Johnson & Johnson Consumer Inc. read more
“The court rightly dismissed the plaintiffs’ request to prevent J&J from engaging in legitimate business transactions, should it choose to do so,” said Diane Sullivan, attorney for Weil, Gotshal & Manges LLP representing J&J, in a press release.
The legal skirmish was unusual in that lawyers for the plaintiffs asked the judge to bar J&J from taking action. Lawyers for the company said it has yet to decide whether or not to prosecute. Johnson & Johnson Consumer Inc has previously stated that it has “not decided on any particular action in this litigation other than to continue to defend the safety of talc and to litigate these cases under the tort system, such as the demonstrate the ongoing trials “.
The judge is overseeing the bankruptcy case of Imerys Talc America, which once supplied talc to J&J and sought Chapter 11 court protection amid growing litigation. Imerys and J&J have since been battling over whether J&J is required to cover the former supplier’s legal costs under indemnification agreements. Lawyers for the plaintiffs argued that allowing J&J to offload its talc obligations to a unit that would file for bankruptcy would hurt Imerys’ reorganization.
The judge ruled that it would be inappropriate, in the context of the Imerys bankruptcy case, to legally prohibit J&J from undertaking any future hypothetical restructuring that could result in the separation of talc liabilities. She said that Imerys could take legal action against J&J if J&J decides to separate its talc responsibilities in a way that Imerys considers harmful or illegal.
TWO-STEP BANKRUPTCY IN TEXAS
J&J is facing lawsuits from tens of thousands of plaintiffs alleging that its baby powder and other talc-based products contained asbestos and caused cancer. The plaintiffs include women with ovarian cancer and others battling mesothelioma.
J&J plans to use Texas’ “mergers that divide” law, which allows a company to split into at least two entities, Reuters previously reported. For J&J, this could create a new entity housing talc-related liabilities that would then file for bankruptcy to end the litigation.
The maneuver is known among legal experts as a two-stage bankruptcy in Texas, a strategy that other companies facing asbestos-related litigation have used in recent years.
If J&J goes ahead, plaintiffs who have not addressed the issue could end up in protracted bankruptcy proceedings with a likely much smaller business. Future payments to claimants would depend on how J&J decides to finance the entity housing its talc liabilities.
A 2018 Reuters investigation found that J&J had known for decades that asbestos, a known carcinogen, was lurking in its baby powder and other talc-based cosmetics. The company stopped selling baby powder in the United States and Canada in May 2020, in part because of what it called “misinformation” and “unfounded claims” about the product. talc. J&J maintains that its talcum-based consumer products are safe and confirmed by thousands of tests to be asbestos-free.
The blue-chip company, which claims a market value of over $ 450 billion, faces lawsuits from more than 30,000 plaintiffs alleging that its talc products were unsafe. In June, the United States Supreme Court refused to hear J&J’s appeal against a Missouri court ruling that resulted in the award of $ 2 billion in damages to women alleging that talcum powder in l company had caused their ovarian cancer. Read more
Separately, the plaintiffs’ attorneys are seeking a similar restraining order against J&J in a Missouri court. One of those attorneys, Andy Birchfield, said in a statement that he and other attorneys will review the Imerys decision and continue to try to prevent J&J from using Texas law to separate its talc responsibilities and steer them towards bankruptcy.
Reporting by Mike Spector, Maria Chutchian and Jonathan Stempel in New York; Editing by Chris Reese, Marguerita Choy and Karishma Singh