As Johnson & Johnson faces thousands of lawsuits over its now obsolete talc-based baby powder, an appeals court rejected the company's plan to use bankruptcy code Chapter 11 — which allows its unit to take the claims into bankruptcy — according to court documents and The Wall Street Journal.
LTL Management is a business J&J created in 2021 under Chapter 11 to absorb lawsuits accusing its parent company of knowing the talc-based powders had a cancer risk but not telling consumers. In August, the unit said in court documents that bankruptcy is its only option, but an appeals court dismissed this plan Jan. 31.
The 1-year-old unit has previously said legal costs would surpass $1 billion, which would add to the roughly $4.5 billion J&J's consumer business already dealt out in similar lawsuits, according to the Journal. Johnson & Johnson has enough to cover the $1 billion and thus doesn't need Chapter 11, the appeals court ruled.
Letting J&J use the bankruptcy code "would allow tunnel vision to create a legal blind spot," Judge Thomas Ambro of the U.S. Court of Appeals for the Third Circuit wrote. "We will not do so."