J&J’s Latest Talc Bankruptcy Bid Must Be Dismissed, DOJ Says (1)

Johnson & Johnson’s latest attempt to use a subsidiary’s bankruptcy to resolve tens of thousands of talc-related personal injury claims should be thrown out, the Justice Department’s bankruptcy watchdog said.

The Red River Talc LLC bankruptcy mirrors two earlier Chapter 11 cases for a J&J talc unit that were dismissed by a different bankruptcy court, the US Trustee said. J&J is trying to work around those earlier dismissals by placing Red River, a new entity, into Chapter 11 in the US Bankruptcy Court for the Southern District of Texas, the US Trustee said in a Monday motion to dismiss the case.

“Taken as a whole, J&J’s tactics are a textbook example of bad faith,” the US Trustee said in the filing.

J&J’s prior attempts to use bankruptcy to resolve widespread allegations that its talc products caused cancer fell apart after the Third Circuit held that the subsidiary placed into bankruptcy wasn’t in financial distress.

Red River has no need for bankruptcy protection and has no “valid restructuring purpose,” the watchdog said. The entity shouldn’t remain in bankruptcy to pursue benefits for J&J, which itself isn’t in bankruptcy, the filing said.

Red River’s proposed restructuring plan also runs afoul of the US Supreme Court’s June decision throwing out Purdue Pharma’s bankruptcy plan, the US Trustee said. Red River’s plan includes a number of liability protections designed to shield J&J from legal actions, but those protections violate the Purdue ruling because they would be granted to non-bankrupt entities without the consent of creditors, the US Trustee said.

It’s unlikely that J&J would be able to change the plan to comply with Purdue, because then it could only obtain narrower releases that don’t achieve the broad resolution J&J is pursuing through the Red River filing, the US Trustee said.

The DOJ earlier this month lost a bid to transfer the case to the US Bankruptcy Court for the District of New Jersey, which had thrown out J&J’s last bankruptcy attempt.

J&J didn’t immediately respond to a request for comment. It has maintained that its talc-based products are safe.

Red River Talc is represented by Jones Day.

The case is Red River Talc LLC, Bankr. S.D. Tex., No. 24-90505, 10/21/24.