The official committee of talc claimants has filed a motion in Chapter 11 bankruptcy court to authorize themselves to pursue Johnson & Johnson directly instead of having to route claims through LTL Management, the subsidiary that was created to absorb liability for talc claims. The 42-page motion seeks permission to settle their causes of action against LTL’s parent company, affiliates, directors, officers, and companies involved in the divisive merger and consumer health spinoff.

Tens of thousands of people have made claims that J&J has allowed asbestos-contaminated talc products to enter the market. Consumers allegedly developed a number of adverse health effects, including mesothelioma and ovarian cancer. These tens of thousands of claimants have combined to form a multidistrict litigation (MDL) represented by a sample of plaintiffs’ attorneys acting as a committee for the whole MDL.

The talc claimant committee claims that according to the Third Circuit Court of Appeals, standing to pursue this cause of action can be obtained where a claim exists if “the debtor unjustifiably refuses to pursue the claim, and the Court grants permission to initiate the action on behalf of the debtor’s estate.” The committee asserts that LTL has acted unreasonably because it is artificially manufacturing its financial distress.

The first bankruptcy filed by LTL was dismissed because the Third Circuit held the opinion that the subsidiary was not in financial distress. Per the motion, “An ordinary company might be in financial distress—but solvent—where liabilities pose a ‘serious threat [to a] company’s operational well-being,’ or where a company has ‘difficulty raising or borrowing money, or otherwise ha[s] impaired access to the capital markets. . .’ But LTL is not an ordinary company. Its sole reason for existence is to pay, and its sole liabilities consist of, talc claims.“

This action has therefore boxed LTL into an unwinnable situation in filing for bankruptcy again. As in the case of the first bankruptcy, LTL is still not in financial distress because it is still connected to J&J, a corporation that makes billions of dollars each year which will allow the corporation to weather the financial strain of settling the talc lawsuit verdicts. 

Therefore, the plaintiffs claim, LTL’s second bankruptcy is just as illegitimate as the first, and rather than be forced to litigate the bankruptcy process again, plaintiffs should be allowed to pursue J&J more directly. The plaintiffs have not, however, surrendered their right to contest LTL’s second bankruptcy either.