Plaintiffs in talc lawsuits against Johnson & Johnson urged an appeals court on Monday to reinstate their cases, arguing that the profitable company shouldn’t be permitted to use a bankrupt subsidiary to thwart claims that the products cause cancer.
They requested that the bankruptcy of J&J’s subsidiary LTL Management be dismissed by a panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia, claiming that LTL is a “concocted” corporation established only to prevent them from having their day in court.
J&J spun off LTL in October, transferred its talc liabilities to it, and a few days later filed for bankruptcy on the newly formed subsidiary. J&J maintains that its talc products are safe.
The “Texas two-step” restructuring tactic stopped about 38,000 lawsuits J&J was facing, which claimed that its baby powder and other talc-based products contained asbestos and were to blame for mesothelioma and ovarian cancer.
Lawmakers and legal experts are among the critics who claim J&J’s bankruptcy strategy could serve as a model for other large corporations looking to avoid juries in mass tort lawsuits.
During Monday’s arguments, Circuit Judge Julio Fuentes questioned Jeffrey Lamken, the attorney for the cancer victims, about whether the bankruptcy court could resolve the claims more quickly than having each case heard individually in other courts.
According to Lamken, the court shouldn’t make a broad determination about whether bankruptcy is “better” because its protections should only be given to businesses that are experiencing financial distress and need to file for bankruptcy.
He argued that since bankruptcy requires an extensive settlement to be reached through a drawn-out legal process before any individual case can be settled, cancer victims should be permitted to sue. According to Lamken, LTL is not under any pressure to act quickly because it has no operations and would not suffer any consequences from declaring bankruptcy.
According to David Frederick, who is the attorney for a different group of cancer plaintiffs, LTL can pay “less money, more slowly” as a result of the bankruptcy.
“Not a dime will be paid until the last appeal of the last objector is resolved,” Frederick said.
The fastest and most equitable solution, according to J&J, is for all current and future talc lawsuits to be resolved collectively through the bankruptcy court.
The results of litigation in other courts can be very diverse. While “most people won’t even get a turn at bat” and some plaintiffs will pass away before their cases go to trial, some plaintiffs will hit home runs and receive significant verdicts, according to LTL attorney Neal Katyal.
According to Katyal, ongoing litigation also results in significant “dead weight” in terms of legal fees and court costs.
$2 billion has been set aside by the company as a starting point rather than a “cap” for the resolution of talc claims, according to LTL executives.
According to bankruptcy court records, J&J faced costs from $3.5 billion in verdicts and settlements prior to filing for bankruptcy, including one in which 22 women were awarded a judgment of more than $2 billion.
But according to LTL’s court documents, more than 1,500 talc lawsuits have been dropped without any payment from J&J, and the majority of cases that have gone to trial have ended in defense verdicts, mistrials, or judgments for the business on appeal.
The cancer victims are pleading with the appeals court to reverse a bankruptcy judge in New Jersey who permitted LTL’s bankruptcy to go forward.
When LTL filed for bankruptcy, lawsuits against it were automatically stayed, and U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey decided in February that LTL’s bankruptcy should also halt talc lawsuits against its parent company J&J.
Kaplan argued that the bankruptcy court is more qualified than other courts to deal with mass tort litigation and refused to dismiss the case.
(Adapted from FinancialExpress.com)