Anne Hemenway—Senior Attorney
Over 90,000 individuals have sued Johnson & Johnson and other parties for damages alleging that its talcum powder products—including Johnson's Baby Powder, which has been widely used on babies over the past 50 years—contain asbestos, which causes cancer. While Johnson & Johnson denies that its products contain asbestos, and insists that there is no link between its products and cancer, it has stopped selling talc-based baby powder worldwide.
Since 2021, Johnson & Johnson has tried to use the bankruptcy courts to settle the tens of thousands of claims against it, without success. The effort failed in 2021 and in 2023, and most recently failed a third time on March 31, 2025. In 2021, Johnson & Johnson created a subsidiary called LTL Management and then pulled all of the baby powder claims into the subsidiary. A day after that was accomplished, LTL Management declared bankruptcy in the Bankruptcy Court for the Western District of North Carolina. The LTL bankruptcy was transferred to the Bankruptcy Court for the District of New Jersey and was ultimately dismissed by the Third Circuit Court of Appeals because the appellate court found that LTL—"a company created to file for bankruptcy"—was not in any financial distress. In re LTL Mgmt., LLC, 64 F.4th 84, 110 (3d Cir. 2023).
LTL started a second bankruptcy in the Bankruptcy Court for the District of New Jersey in April 2023, the day after the first bankruptcy was dismissed pursuant to the mandate of the Third Circuit. Johnson & Johnson maintained that the bankruptcy would resolve all of the contested lawsuits in the most equitable way for all parties. As part of the 2023 proposed plan, Johnson & Johnson agreed to establish a trust fund to pay $8.9 billion over 25 years to the claimants. Critics dubbed the shenanigans as the "Texas two-step" and a clear effort to shield Johnson & Johnson by creating an insolvent company. In 2023, the bankruptcy judge, bound by the Third Circuit's decision, rejected LTL Management's bankruptcy filing, but urged the parties to continue negotiations to achieve a global resolution of all claims. In re LTL Mgmt., LLC, 652 B.R. 433, 455 (Bankr. D.N.J. 2023), aff'd sub nom. In re LTL Mgmt. LLC, No. 23-2971 and 23-2972, 2024 U.S. App. LEXIS 18437 (3d Cir. July 25, 2024).
Johnson & Johnson's latest attempt at achieving global settlement of the talc claims through bankruptcy, In re Red River Talc LLC, Case No. 24-90505, 2025 Bankr. LEXIS 863 (Bankr. S.D. Tex. Mar. 31, 2025), was rejected by the Bankruptcy Court for the Southern District of Texas partially on the grounds that the claimants' attorneys failed to secure the consent of enough claimants. Starting in June 2024, well before the bankruptcy filing, Johnson & Johnson started soliciting votes from claimants with ovarian and other gynecological cancer claims. The disclosure statements it sent to claimants stated that once 75% of the claimants agreed to the settlement, Johnson & Johnson would form a Texas entity called Red River Talc, LLC, and immediately file for Chapter 11 bankruptcy and seek confirmation of its plan. This is what, in fact, happened, but the Texas bankruptcy court dismissed the case because of inconsistencies with the prepetition voting, the denial of plan confirmation, and issues with the Texas divisional merger rules. The court noted that although "[r]esolving mass tort claims in bankruptcy is a valid bankruptcy purpose," 2025 Bankr. LEXIS 863, at *96, the fact that Johnson & Johnson filed a settlement-driven divisional merger bankruptcy case distinguished this case from other mass tort bankruptcy cases, id. at *98. The lack of a real business to operate or save or hard assets to sell or employees to consider, coupled with the fact that the debtor, Red River Talc, would be required to rely on funding exclusively from Johnson & Johnson highlighted the need for proper third-party releases and inclusion of retailers in the channeling injunction and pointed to the importance of adhering to the rules. Id. at *98-99. The bankruptcy judge noted that the tort litigation should not be stayed "while all of this gets sorted out. Red River and J&J wanted to get a vote on their Plan, and that happened. It is just not a confirmable one and the vote was unnecessarily rushed." Id. at *100. Court-watchers await Johnson & Johnson's next bankruptcy filing.
