New J&J spinoff declares bankruptcy

Oct. 15, 2021

Johnson & Johnson created a subsidiary to manage thousands of legal claims alleging its cosmetic talc caused cancer — and promptly placed it into Chapter 11 bankruptcy.

The new entity, called LTL Management, filed for bankruptcy protection yesterday in North Carolina.

The legal maneuver, dubbed "Texas two-step bankruptcy" is a controversial strategy often used to help drive a settlement of personal injury claims. Under Texas law, the J&J business split in two, forming LTL Management, through a divisional merger.

Critics say the move is an attempt to hide behind bankruptcy and limit payouts.

According to a J&J press release, the move was made in order to "equitably resolve all current and future talc claims." J&J is facing tens of thousands of legal cases from people who allege its cosmetic talc caused cancer — one of which resulted in a $2.12 billion verdict against J&J.

Yet, the drugmaker has won the majority of talc-related jury trials that have been litigated, and maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.