Johnson & Johnson (J&J) attempted to evade paying billions of dollars to talc powder cancer plaintiffs by activating the “Texas Two-Step” by filing for bankruptcy. However, a unanimous three-judge panel in Philadelphia halted that attempt recently by tossing out the bankruptcy filing, which was technically filed by LTL Management, a special J&J sub-company. The court determined that bankruptcy is only accessible for companies that are imminently threatened by a financial crisis, but J&J never claimed to have such worries, so the bankruptcy was not accepted.
With the federal appellate court’s ruling, the talc powder lawsuits remain alive and will head back to the civil justice system for upcoming trials. The Big Pharma-healthcare corporation could still eventually try to appeal the decision up to the U.S. Supreme Court. However, it is worth noting that J&J has lost in the U.S. Supreme Court over another talc lawsuit appeal, which forced the company to pay billions of dollars after a verdict on behalf of several dozen women.
Stepping On the Texas Two-Step
The ruling that keeps the latest round of talc powder lawsuits alive could set significant legal precedent, too. J&J was attempting to use a corporate tactic called the “Texas Two-Step” to avoid financial loss. This tactic involves founding a shell company with no operations in Texas, funneling liabilities into it, and then immediately having that smaller company file for bankruptcy. If successful, claims and pending awards against the larger company are blocked, and plaintiffs are forced to litigate through bankruptcy court, often for a fraction of the amount originally owed to them.
This strategy has been a nightmare for plaintiffs and their attorneys since it was first attempted in 2017 regarding asbestos exposure lawsuits. For the federal appellate court to effectively reject the protections granted through the Texas two-step, it could pave the way for other cases to be handled similarly. What has started as a loss for J&J could end up being a major victory for future plaintiffs in individual lawsuits against other massive corporations.
(For more information about this recent appellate ruling against J&J, you can click here to read a full article from Reuters®.)
If you think you have a J&J talc powder claim, it is not too late to explore your legal options. Call (215) 278-4449 to speak with a talcum powder attorney from Golomb Legal. We are currently representing more than 1,200 women in State and Federal Courts who have been diagnosed with ovarian cancer caused by frequent use of talc powder for personal hygiene purposes. Our attorneys have also served as Lead Counsel in the New Jersey State Court litigation and as Executive Committee Members in the Federal Court Multi-District Litigation. We have been there from the beginning fighting on behalf of women across the country.
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