A judge has transferred a high-profile bankruptcy case involving a Johnson & Johnson subsidiary to New Jersey, setting up a key test of a legal maneuver designed to protect the company from billions of dollars in personal injury claims.
Legal experts said the ruling by U.S. bankruptcy judge Craig Whitley on Wednesday represents a setback for J&J, which initially applied for Chapter 11 protection for its North Carolina subsidiary during a process known as the Texas two-step process. .
During this process, J&J used permissive state laws to create a new subsidiary of LTL Management in Texas to manage nearly 40,000 legal claims that its baby talc contained asbestos and caused cancer. It then transferred this entity to North Carolina and immediately filed for bankruptcy, following a path previously taken by several other corporations facing personal injury claims.
Critics argue J & J and other companies are “forum shopping” for favorable places to circumvent legal claims and to use complicated legal maneuvers to limit their liability.
Carl Tobias, a law professor at the University of Richmond’s law school, said J&J may have decided that the North Carolina court was a better place for the bankruptcy, as its corporate headquarters are located in New Jersey and filed many of the legal claims there. word. The future of the talk claims will now depend on how the New Jersey bankruptcy judge and the district judge would handle many of the talk claims against J&J.
Judge Whitley granted J&J temporary relief by placing a 60-day stay on the personal injury lawsuits pending against the company.
John Kim, chief legal officer of LTL Management, said although the company believes the right place for the bankruptcy in North Carolina, he will continue to work with all parties to seek an “effective and equitable solution”.
“We maintain our position that Johnson’s Baby Powder is safe, does not contain asbestos and does not cause cancer,” he said.