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J&J logo and a sign rejected

Appeals Court Rejects J&J's Controversial Bankruptcy Plan

J&J logo and a sign rejected

In a win for mesothelioma plaintiffs, a three-judge panel in the Federal Appeals Court/Third Circuit court of Philadelphia has unanimously ruled that Johnson & Johnson cannot use bankruptcy to sidestep more than 40,000 talcum-powder lawsuits.

A year ago, J&J formed the subsidiary, LTL Management, in order to deal with their talc liabilities for the express purpose of declaring it bankrupt days later, a controversial tactic known as the Texas Two-Step.

On Monday, the Court dismissed that LTL Management/J&J, due to their massive assets, was facing any genuine financial distress that a bankruptcy was meant to address.

J&J will undoubtedly challenge the ruling and appeal to the U.S. Supreme Court. It could take up to a year for the Supreme Court to accept or reject and if it accepts, another year or two until the matter is decided.

Although this is a promising development and likely to discourage profitable companies from declaring bankruptcy in order to limit compensation, asbestos claimants are still a long way off from being able to sue J&J in court.

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