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(Reuters) – The U.S. Justice Department’s bankruptcy watchdog said on Thursday Johnson & Johnson abused the bankruptcy system to end a multibillion-dollar lawsuit alleging its baby powder caused the cancer.
The DOJ’s Office of the US Trustee filed a amicus brief with the 3rd U.S. Circuit Court of Appeals, urging the court to dismiss a New Jersey bankruptcy case brought by J&J subsidiary LTL Management. The U.S. trustee said J&J used its subsidiary’s bankruptcy filing as “a weapon against tort plaintiffs rather than a means of good faith reorganization.”
J&J maintains that its baby powder and other talc-based products are safe. A company spokesperson said Thursday that J&J is confident the appellate review will keep New Jersey’s bankruptcy case on track.
“Unlike the tort system, the bankruptcy system has an established process for resolving all cases fairly and efficiently,” J&J said in an emailed statement.
J&J spun off its talc responsibilities to a new subsidiary, LTL Management LLC, which it then filed for bankruptcy in October, pausing 38,000 individual lawsuits that had been filed against J&J.
The tactic was endorsed in February by U.S. Chief Justice Michael Kaplan, who ruled that J&J’s approach was “unquestionably” appropriate and offered a faster and fairer alternative to decades of litigation in other courts.
Kaplan’s decision not to dismiss the case has been appealed by groups of cancer plaintiffs who have alleged that J&J’s talc products cause mesothelioma and ovarian cancer. Those plaintiffs also filed opening briefs in the 3rd Circuit on Thursday, reiterating their arguments that LTL’s bankruptcy filing was a “sham” designed to protect J&J.
The US trustee backed that position, saying LTL “was created for the sole purpose of filing for bankruptcy” and that it filed for bankruptcy just two days after it was formed. The company was run by J&J employees and had no business or creditors to protect other than J&J, according to the amicus brief.
LTL has yet to file a brief in the 3rd Circuit case and its response is expected August 15.
The US Trustee frequently opposes attempts to use the bankruptcy courts to protect a non-bankrupt parent company or other owners, affiliates or other allies of a bankrupt company. He successfully opposed Purdue Pharma’s efforts to shield its owners, members of the Sackler family, from opioid lawsuits, although that decision is being reviewed in another appeal.
The case is In re LTL Management LLC, United States Court of Appeals for the Third Circuit, No. 22-2003.
For LTL: Greg Gordon of Jones Day
For the Talc Applicants Committee: David Molton of Brown Rudnick, Melanie Cyganowski of Otterbourg, Daniel Stolz of Genova Burns, Brian Glasser of Bailey Glasser, Lenard Parkins of Parkins & Rubio and Jonathan Massey of Massey & Gail
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