3M (NYSE: MMM) — which has also been seeking to do a “Texas two-step” to shield itself from liability in military earplug lawsuits — was down more than 2%. (MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was up more than 9%.)
Critics alleged that J&J seeks to shield itself from billions of dollars worth of lawsuit payouts involving people who claim J&J’s talc-based baby powder caused them to develop cancer.
A New Yorker expose last year detailed how J&J created a new LLC called LTL Management and then moved the talc liability over to LTL. The new LLC then filed for Chapter 11 bankruptcy protection. Calling the bankruptcy a “shell game,” plaintiffs in the talc lawsuits appealed, with the U.S. Court of Appeals for the Third Circuit holding expedited hearings in September. (J&J also plans to spin off its consumer business in 2023.)
Thomas Ambro, the circuit judge, wrote in the ruling filed today that “only those facing financial distress can call on bankruptcy’s tools to do so.”
“Applied here, while LTL faces substantial future talc liability, its funding backstop plainly mitigates any financial distress foreseen on its petition date.”
In a statement shared with media outlets, Johnson & Johnson said it would appeal: “As we have said from the beginning of this process, resolving this matter as quickly and efficiently as possible is in the best interests of claimants and all stakeholders. We continue to stand behind the safety of Johnson’s Baby Powder, which is safe, does not contain asbestos and does not cause cancer.”
