DOJ Opposes JnJ’s Texas Bankruptcy Move in Talc Lawsuit Cases

DOJ Opposes JnJ’s Texas Bankruptcy Move in Talc Lawsuit Cases

Introduction

The U.S. Department of Justice (DOJ) recently opposed Johnson & Johnson’s latest attempt to use bankruptcy to resolve tens of thousands of talcum powder lawsuits from women diagnosed with ovarian cancer.

The History and Background of Talc Lawsuits Against JnJ

The company faces around 62,000 lawsuits alleging its Baby Powder and Shower-to-Shower products, long used by consumers on their genitals, caused cancer. This litigation, which began in 2016, follows research linking talc to ovarian cancer and the discovery of asbestos in these products.

JnJ’s Chapter 11 Bankruptcy and the Texas Two-Step Maneuver

While J&J has faced massive verdicts in early state trials, awarding billions to affected women, it has resisted direct settlement efforts. Instead, the company has made multiple attempts to consolidate and resolve claims through bankruptcy, a move that critics say unfairly limits the amount plaintiffs can recover. In its latest effort, J&J created a subsidiary, Red River Talc, LLC, which filed for Chapter 11 bankruptcy in Texas, transferring liability from the parent company to this entity in a maneuver known as the “Texas Two-Step.” This tactic allows J&J to cap the financial exposure of its core business by placing liability on the subsidiary with limited assets, which critics argue reduces compensation for plaintiffs to only a fraction of what they might be owed.

JnJ’s Continued Efforts to Leverage Bankruptcy for Talc Claims

This is J&J’s third attempt to use the Texas Two-Step in resolving talc-related lawsuits. The previous filings were dismissed by federal judges who ruled that J&J did not face financial distress, an essential condition for bankruptcy. However, this latest filing in Texas, rather than New Jersey (where J&J is based), continues the tactic, aiming to circumvent the earlier rulings.

Dismissal of Motion

On October 21, the DOJ Trustee for Texas filed a motion to dismiss the case, criticizing the company’s repeated bankruptcy filings as “bad faith” attempts to misuse the U.S. bankruptcy system. According to the DOJ, this approach continues to lack a “valid restructuring purpose” and instead serves as a strategy to avoid legal responsibility for J&J, the primary beneficiary, while limiting plaintiffs’ ability to secure full compensation. The DOJ also pointed out that Red River has even fewer liabilities than before, as most talcum powder asbestos-related claims have been settled.

DOJ's Response to JnJ’s Bankruptcy Strategy

The DOJ’s motion argued that J&J is repackaging its previous tactics by using a new entity and filing in a different jurisdiction in hopes of securing a favorable outcome. “This Court should not permit J&J and the Debtor to evade the rulings of another federal court in this manner,” the motion states.

Consolidation of Lawsuits

In federal court, talcum powder lawsuits have been consolidated in the District of New Jersey since 2016. Originally assigned to one federal judge, the litigation was transferred after her retirement. If the DOJ’s motion to dismiss is successful, the cases will return to New Jersey, where the court had scheduled the first federal bellwether trial for December 2024. This trial is expected to be closely watched to gauge jury response to evidence and may set the tone for further litigation if no settlement is reached.

Trial date pushed back

J&J’s ongoing use of bankruptcy has delayed litigation, potentially pushing back the trial date once again. The company has repeatedly sought to pause proceedings during bankruptcy reviews, a tactic that could indefinitely extend the delay. While state court trials have yielded significant verdicts, no federal trials have yet taken place. This repeated use of bankruptcy courts to stay litigation has drawn intense criticism from legal experts and plaintiff advocates who argue it undermines the legal system and denies plaintiffs timely access to justice.

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