The same judge that approved Johnson & Johnson’s (J&J) plan to shift its talcum product litigation liabilities into a subunit that declares bankruptcy has granted an expedited appeal of his own order, Reuters reported.
In February, U.S. Bankruptcy Judge Michael B. Kaplan faced criticism after ruling that J&J’s ploy, dubbed the “Texas Two-Step,” is not an abuse of the bankruptcy system. The bankruptcy judge ruled that J&J’s plan to create a subsidiary to hold its talc liabilities and then have that subsidiary file for Chapter 11 protection was not an abuse of the U.S. bankruptcy code and was instead the best way forward for plaintiffs.
Now, on March 30, Judge Kaplan allowed plaintiffs who have alleged that J&J’s asbestos-contaminated talc products caused them to develop cancer to appeal his ruling to the 3rd U.S. Circuit Court of Appeals.
In granting the fast-track appeal, Judge Kaplan said, "Clearly, this impacts decisions and potential restructurings beyond what's being litigated in this court."
The controversy of J&J’s Texas two-step has become a rallying cry for lawmakers to change the bankruptcy system.
Just days after J&J created a subunit in October called LTL Management through a divisive merger to hold its talc liabilities, the new LLC declared bankruptcy.
Judge Kaplan explained his decision to approve LTL Management’s bankruptcy because it would result in a faster resolution for the tens of thousands of talc cancer cases pending against J&J. But critics allege that his approval spares wealthy companies like J&J from having to face their accusers in court.
LTL Management requested the expedited appeal be reconsidered and instead first have the appeal adjudicated in a U.S. District Court. Judge Kaplan rejected LTL’s argument, saying that an appeal at the U.S. District Court level would ultimately delay the outcome of the case. By expediting the case to the Circuit court immediately, the appeal will be heard by the second-highest legal authority in the nation before the Supreme Court.
Over 38,000 talc cancer claims against J&J are pending. Talc plaintiffs have filed claims either for ovarian cancer or mesothelioma. Some plaintiffs have sought separate committees for each type of cancer claim. However, Judge Kaplan also ruled on March 30 that just one plaintiff committee should be present during the bankruptcy appeal.
Prior to LTL Management’s filing for bankruptcy, J&J was facing having to pay out $3.5 billion in talc verdicts or settlements, including a 2018 decision in Missouri that awarded 22 plaintiffs $2.1 billion for their cancer claims.