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October 21, 2021

J&J’s “Texas Two-Step” Moves Forward

On October 14, Johnson & Johnson filed for bankruptcy protection for its newly-established talc powder subsidiary in the Western District of North Carolina.  This subsidiary, named LTL Management LLC, holds all of the liabilities associated with tens of thousands of open lawsuits alleging that J&J’s talc-based baby powder caused ovarian cancer and mesothelioma. In order to shield itself from expanded liability stemming from these lawsuits, J&J executed the controversial “Texas two-step bankruptcy,” wherein a J&J subsidiary was split in two, all of the talc suit liabilities (nearly 40,000 claims) were moved into LTL, and the new entity will be used solely for holding these talc-related debts and paying out creditors. This maneuver has significant implications for the plaintiffs, whose trials will now be halted while LTL undergoes bankruptcy proceedings and who are expected to consequently receive a far lesser amount of payouts.