In May 2023, Johnson & Johnson's subsidiary, LTL Management, filed for Chapter 11 bankruptcy to manage its talc liabilities, a move designed to resolve claims efficiently and equitably. This was the second attempt by LTL Management to seek bankruptcy protection after the previous filings were blocked by courts.

LTL Management's reorganisation plan includes a commitment to contribute up to $8.9 billion, payable over 25 years, to resolve all current and future claims related to their talc products. This move was intended to create a structured way to handle the massive volume of lawsuits while avoiding the prolonged and costly litigation process​.

However, the Third Circuit Court of Appeals dismissed LTL’s bankruptcy filing, ruling it was not made in good faith. The court found that LTL was not in financial distress, a requirement for filing under Chapter 11, because it had a significant financial backstop from Johnson & Johnson. The court criticized the use of the "Texas two-step" strategy, where J&J created LTL to isolate the talc liabilities and then filed for bankruptcy​ 

Johnson & Johnson plans to appeal this ruling, maintaining that the bankruptcy process remains the fairest and most efficient way to address the talc-related claims​.

Read full articles here: Insurance Journal, Financial Times

It is disconcerting to learn that Johnson and Johnson is again considering the bankruptcy courts as a shield against accountability.

Leigh ODell

Markets insider | 24/10/2023