The U.S. Justice Department told a federal appeals court that Johnson & Johnson's strategy for moving talc injury litigation to chapter 11 violates the regime Congress has authorized for litigating mass torts, MarketWatch.com reported. The U.S. Trustee Program, a Justice Department unit monitoring bankruptcy courts, said in a Thursday filing with the U.S. Court of Appeals for the Third Circuit that Johnson & Johnson's decision to put a newly formed subsidiary into chapter 11 to drive settlements of talc litigation circumvented federal multidistrict litigation procedures which have been prescribed by Congress as the way to deal with mass torts. Johnson & Johnson used an emerging restructuring transaction called a Texas divisive merger to send the talc liability to the subsidiary before it filed bankruptcy, a strategy that will be scrutinized by the appeals court. The U.S. Trustee and talc injury claimants want the Third Circuit to reverse a bankruptcy judge who authorized the Johnson & Johnson talc subsidiary to stay in chapter 11.
