A court ruling allowing Johnson & Johnson to use a controversial bankruptcy strategy to force cancer victims into potential settlement talks has raised the odds that other companies facing costly product-liability claims like 3M Co., and Dow Inc. may follow suit, analysts and legal experts say, Bloomberg News reported. A judge in February cleared J&J to employ a legal tactic known as the Texas Two-Step in which it shunted almost 40,000 claims into a purposely created unit that then filed for bankruptcy under a business-friendly Texas law. The ruling temporarily halted the litigation over J&J’s iconic baby powder while the company tries to negotiate settlements. Some legal experts worry the ruling may set off a chain reaction of similar filings by otherwise solvent companies that could swamp the courts. J&J argues the move was its only way of corralling talc litigation costs. Advocates for cancer victims counter the filing is just a way for J&J to cap how much it has to pay out. Two victim groups have appealed the court decision to let the bankruptcy continue. On Monday, one of the groups said it will press to have the case dismissed because the chapter 11 petition was filed in bad faith and isn’t a legitimate attempt to reorganize a financially struggling company.
