J&J talc bankruptcy plan appeal denied

An appellate court Thursday upheld a bankruptcy court’s ruling from last year that denied Johnson & Johnson’s (NYSE:JNJ) effort to use a subsidiary, LTL Management, to declare bankruptcy to settle cancer claims related to its talc-based baby powder.

In its judgment, the appellate court rejected the drugmaker’s argument that the bankruptcy was necessary due to cash-flow and insolvency issues it was facing.

“When future insolvency is a realistic possibility based on meaningful evidence — not just the result of a highly speculative ‘worst-case’ scenario — a mass-tort defendant has a viable case for bankruptcy,” Judge Thomas Ambro wrote.

Erik Haas, J&J’s worldwide vice president of litigation, told Bloomberg the company plans to appeal the decision to the U.S. Supreme Court. He added that the decision doesn’t impact J&J’s ongoing plan for a third LTL bankruptcy to handle claims.

J&J has offered ~$6.475B over 25 years to resolve tens of thousands of lawsuits. If 75% of claimants approve the plan, the company said it would seek a “prepackaged” Chapter 11 bankruptcy through LTL. July 26 is the deadline for the vote.