A subsidiary of pharmaceutical company Johnson & Johnson, LTL Management, said in court documents that bankruptcy is the only option to settle the thousands of lawsuits lodged against J&J's talc-based baby powder, The Wall Street Journal reported Aug. 16.
J&J created LTL Management in 2021 to handle the lawsuits, which hover at about 40,000, that allege its talc-based baby powder posed a cancer risk but didn't inform customers of it. LTL's strategy is to bankrupt itself under Chapter 11, which would then protect J&J at large, but the case's Texas judges are expected to dissect this plan, according to the Journal.
Chapter 11 is a bankruptcy code that lets debtors who can't pay off debts reorganize its business and debt structure, according to Cornell Law School's Legal Information Institute.
Without LTL acting as a shield, the business said legal costs would surpass $1 billion, which would stack on top of the billions it already shelled out in other talc lawsuits, according to the Journal. One of its biggest payments happened in 2020 when a different appellate court ordered the pharmaceutical company to award more than $2 billion to women with ovarian cancer.
The Texas appellate court decision on whether to allow the subsidiary to use Chapter 11 could act as a precedent for future similar cases between drug companies and consumers.
Editor's note: The headline was revised 12:00 p.m. CT to specify LTL Management, not J&J, is planning on bankruptcy.