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Last year, Johnson & Johnson proposed an $8.9 billion settlement to resolve 40,000 suits through a subsidiary created in 2021 to absorb the liability from its talc powder lawsuits. The plan was to have the unit file for bankruptcy protection — turning to the court to then disburse the settlement.
Lindsey Simon, a bankruptcy professor at Emory University School of Law, said the reason bankruptcy court was an appealing way to settle mass litigation was that it allowed a company to end cases from claimants who did not agree to its offer, and also from future claimants.
“The ability of bankruptcy law to force that 25 percent to accept a deal impacting their rights — current and future claimants — that’s strong medicine,” she said. “That’s a heavy benefit that’s not given lightly. Once it’s done there’s no going back.”
A judge rejected that bankruptcy request in July, saying that Johnson & Johnson was not actually in any financial distress, a key requirement for filing for bankruptcy. The first attempt to resolve the issue in bankruptcy was blocked by a judge for the same reason.
The latest settlement also depends on a Chapter 11 reorganization, by a unit called LLT Management. The company, previously known as LTL Management, was recently reincorporated in Texas, where Johnson & Johnson is poised to file, from New Jersey. Texas courts have in the past taken more lenient stances on the standard for when a company can file for bankruptcy.
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