A Johnson & Johnson subsidiary urged a federal appeals court to uphold the controversial legal strategy it used to move to bankruptcy roughly 38,000 lawsuits linking its talc-based products to cancer, WSJ Pro Bankruptcy reported. The subsidiary, LTL Management LLC, said in court papers filed on Monday that chapter 11 is the only option for compensating all claimants relatively quickly. LTL, which J&J created last year to move mass talc litigation to bankruptcy, laid-out a defense of its strategy in its filing in the Third U.S. Circuit Court of Appeals, which is considering a request by injury claimants to have the subsidiary’s chapter 11 bankruptcy thrown out of court. The outcome of the appeal could dictate whether J&J’s restructuring strategy catches on more widely among companies facing costly litigation over allegedly dangerous or defective products. Appeals judges are expected to scrutinize a type of corporate restructuring in which companies facing mass litigation create a new subsidiary with minimal business operations and under Texas law assign it responsibility for tort liabilities before placing it in chapter 11.
