Judge to Consider Blocking J&J from Giving Talc Claims to Unit
(Bloomberg) -- A bankruptcy judge agreed to consider blocking Johnson & Johnson from putting billions of dollars in potential health claims into a unit that could file bankruptcy to resolve the liabilities.
U.S. Bankruptcy Judge Laurie Silverstein ordered J&J to appear at a hearing Thursday afternoon to respond to a request from people who say they were harmed by the company’s baby powder. Those alleged victims claim J&J may use “corporate manipulations” to dump talc-related claims into a subsidiary in a “divisive merger” that would protect the consumer product giant’s profits.
Under the U.S. bankruptcy code, companies can put a unit facing large numbers of lawsuits under court protection while a trust is created to pay victims. Such trusts have been used to settle hundreds of thousands of lawsuits, ranging from people harmed by the industrial substance asbestos to the victims of pedophile priests. Typically lawyers for people suing negotiate for months, and sometimes years, with a company to decide how much money it and its insurers should contribute to the trust.
J&J lawyer Ted Tsekerides told Silverstein that he hasn’t had a chance to talk to his client about the request for a so-called temporary restraining order. The motion was filed in the bankruptcy case of Imerys Talc America, which was J&J’s main source of talc used in its baby powder.
Imerys filed for bankruptcy in 2019 to try to resolve the lawsuits, which claim asbestos-laced talc causes cancer. It negotiated a deal with alleged victims to set up a trust funded with insurance proceeds and money from asset sales. On Tuesday, Imerys sued J&J, claiming the consumer products company had promised to help pay the costs associated with the baby powder lawsuits.
Silverstein said she wasn’t sure whether she would grant the request by the victim’s lawyers, but wanted to hold a hearing quickly to set up a process and a schedule to determine if the temporary restraining order was necessary.
Attorney Natalie Ramsey said quick action to stop J&J was needed because the company could spin off the talc liabilities in as little as two hours.
Dow Jones reported on July 20 that J&J had hired a law firm to explore the possibility of putting a subsidiary into Chapter 11 to resolve its talc liabilities.
The case is In Re Imerys Talc America Inc., 19-10289, U.S. Bankruptcy Court, District of Delaware (Wilmington). To see the docket on Bloomberg Law, click here.
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