Johnson & Johnson cannot use bankruptcy court to resolve civil lawsuits that claim its iconic baby powder caused cancer, a federal appeals court ruled Monday.
The opinion foiled Johnson & Johnson's plan to shift onto a new entity, LTL Management LLC, some 38,000 lawsuits that alleged the talc in Johnson's Baby Powder has caused ovarian cancer and mesothelioma.
LTL Management filed for chapter 11 protection in hopes of resolving the claims that have already cost Johnson & Johnson $1 billion.
The pursuit of bankruptcy protection by LTL Management does not meet the bankruptcy code's intended purpose, since LTL Management is not in financial distress, the court opinion said.
"Good intentions— such as to protect the J&J brand or comprehensively resolve litigation—do not suffice alone," the opinion added.
Johnson & Johnson, which maintains its baby powder is safe and does not cause cancer, said it would challenge the ruling.
"LTL Management LLC initiated this process in good faith and our objective has always been to equitably resolve claims related to the Company's cosmetic talc litigation," the company said in a statement.
"Today's ruling does not reflect the facts established during the Bankruptcy Court's trial regarding the appropriateness of LTL's formation and filing, nor the Company's intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants," the company added.
Critics had urged the court to reject the legal maneuver fearing it could prompt other big companies to avoid bringing mass tort lawsuits before juries.
Brian Glasser, an attorney at Bailey & Glasser and trial counsel to the Official Committee of Talc Claimants in the Johnson & Johnson bankruptcy, welcomed the court ruling.
"J&J has no special right to put talc victims in a bankruptcy box. It now has to face these claims in front of juries around the nation," Glasser said in a statement.
Talc, a mineral used in a host of cosmetic products, forms under similar environmental conditions as asbestos, causing the two to occasionally mix in mines.
In 2019, Johnson & Johnson recalled a shipment of baby powder when a sample tested positive for a trace amount of asbestos, the Food and Drug Administration said. Sales of the talc-based product ended in North America the following year.
The company announced last year that it would stop using talc in its baby powder worldwide in 2023. The ingredient would be replaced with cornstarch, the company said.