The U.S. judge declines to prevent J&J from splitting the talc liabilities from the main businesses

August 26 (Reuters) – A US judge has refused to prevent Johnson & Johnson (JNJ.N) from taking steps to discharge Baby Powder’s widespread liabilities from the rest of its business, retaining the option to healthcare company to move thousands of claims from people who used their talc products to a unit that would file for bankruptcy.

U.S. bankruptcy judge Laurie Selber Silverstein denied the plaintiffs’ attorney’s request to block the move Thursday at the end. Cancer victims’ lawyers wanted him to issue a restraining order against J&J as part of his role overseeing the bankruptcy proceedings of one of the company’s former talc suppliers.

J&J is exploring a plan to move its liabilities from the spread of Baby Powder and other talc-related litigation to a start-up business that would later seek bankruptcy protection, Reuters previously reported. The company’s talc products are currently in a subsidiary called Johnson & Johnson Consumer Inc. read more

“The court rightly denied the plaintiffs’ motion to prevent J&J from conducting legitimate business transactions, should it choose to do so,” said Diane Sullivan, a lawyer for Weil, Gotshal & Manges LLP on behalf of J&J, in a statement.

The legal skirmish was unusual as plaintiffs’ attorneys asked the judge to ban J&J from taking action that the company’s attorneys said had not yet decided whether to prosecute. Johnson & Johnson Consumer Inc. has previously said that “it has not decided any particular action in this litigation other than to continue defending talc safety and litigating these cases in the crime system, as evidenced by the pending trials.”

The judge oversees the bankruptcy case of Imerys Talc America, which once supplied talc to J&J and filed Chapter 11 judicial protection in the middle of a litigation amount. Since then, Imerys and J&J have been fighting each other over whether J&J should cover the former supplier’s legal costs under the indemnity agreements. Plaintiffs’ attorneys argued that allowing J&J to discharge its talc liabilities to a unit that would file for bankruptcy would harm the reorganization of Imerys.

The judge ruled that, as part of Imerys’ bankruptcy case, it would be inappropriate for him to legally prohibit J&J from undertaking a hypothetical future restructuring that could result in the separation of talc liabilities. He said Imerys could take legal action against J&J in the event that J&J decides to separate its talc liabilities in a way that Imerys deems harmful or illegal.

LACK OF TWO TEXAS STEPS

J&J is facing legal action from tens of thousands of plaintiffs alleging that their baby powder and other talc products contained asbestos and caused cancer. Among the plaintiffs are women suffering from ovarian cancer and others battling mesothelioma.

J&J is considering using Texas’ “divisions” law, which allows a company to split into at least two entities, Reuters previously reported. For J&J, this could create a new entity that would hold talc liabilities that would then file for bankruptcy to stop litigation.

The maneuver is known among legal experts as a two-step bankruptcy in Texas, a strategy that has been used in recent years by other companies facing asbestos litigation.

Should J&J proceed, unresolved plaintiffs could find themselves in a protracted bankruptcy process with a much more likely company. Future payments to plaintiffs will depend on how J&J decides to finance the entity hosting its talc liabilities.

A 2018 Reuters investigation found that J&J knew for decades that asbestos, a known carcinogen, was hidden in its baby powder and other talc 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 “baseless allegations” about the talc-based product. J&J maintains that its consumer talc products are safe and confirmed through thousands of asbestos-free tests.

The blue company, which has a market value of more than $ 450 billion, is facing legal action from more than 30,000 plaintiffs alleging that its talc products were unsafe. In June, the U.S. Supreme Court refused to hear J&J’s appeal of a Missouri court ruling that resulted in $ 2 billion in damages awarded to women alleging that the talc in the U.S. company caused her ovarian cancer. Read more

Separately, plaintiff’s 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 would study Imerys’ sentence and continue attempts to prevent J&J from using Texas law to separate its talc liabilities and direct them. towards bankruptcy.

Report by Mike Spector, Maria Chutchian and Jonathan Stempel in New York; Editing by Chris Reese, Marguerita Choy and Karishma Singh