A judge has handed over a high-profile bankruptcy case involving a Johnson & Johnson subsidiary to the State of New Jersey, which is a key test of a legal strategy designed to protect the company from billions of dollars in personal injury claims.
Legal experts said that Wednesday’s ruling by U.S. bankruptcy judge Craig Whitley was a setback for Johnson & Johnson, which initially used the Texas two-step method for its North Carolina subsidiary. Apply for Chapter 11 protection.
In the process, Johnson & Johnson used state laws to create a new subsidiary, LTL Management, in Texas to manage nearly 40,000 legal claims that its baby talc contained asbestos and caused cancer. It then transferred the entity to North Carolina and filed for bankruptcy quickly in the same manner as several other companies facing personal injury claims.
Critics believe that Johnson & Johnson and other companies are “forum shopping”, looking for favorable places to avoid legal claims, and using complex legal methods to limit their liability.
Carl Tobias, a professor of law at the University of Richmond School of Law, said that Johnson & Johnson may think that the North Carolina court is a better place to go bankrupt because its company is headquartered in New Jersey and many legal claims are made in Raised there. The future of talc claims will now depend on the decisions of the New Jersey bankruptcy judge and district judges handling many of the talc claims against Johnson & Johnson.
Judge Whitley granted Johnson & Johnson temporary relief and suspended the execution of the pending personal injury lawsuit against the company for 60 days.
John Kim, chief legal officer of LTL Management, said that although the company believes that North Carolina is a suitable location for bankruptcy, it will continue to work with all parties to seek “effective and fair solutions.”
“We insist on the position of Johnson & Johnson’s baby powder that is safe, non-asbestos, and non-carcinogenic,” he said.