TEXAS TWO-STEP UPDATE: Johnson & Johnson Files a Second Bankruptcy Petition to Obtain Approval of $8.9 Billion Settlement
We previously reported on the Third Circuit’s decision to dismiss the New Jersey bankruptcy case filed by a Johnson & Johnson (“J&J”) subsidiary, LTL Management LLC (“LTL”). The Third Circuit concluded J&J’s attempt to consolidate and resolve more than 40,000 lawsuits alleging its baby powder products caused cancer by creating LTL and transferring the liability to it prior to commencing bankruptcy constituted an improper and bad faith filing.
On April 4, 2023, LTL commenced a second bankruptcy case in the District of New Jersey to obtain approval of a reorganization plan providing for an $8.9 billion proposed settlement payout to lawsuit claimants. This amount represents an increase of $6.9 billion over the $2 billion J&J previously agreed to advance to LTL to establish a qualified settlement fund in the prior case. J&J represents that approximately 60,000 claimants have agreed to the new and increased settlement proposal.
Notably, in LTL’s prior bankruptcy filing, the Third Circuit dismissed the case because LTL was not in financial distress due to its financing arrangements with J&J, rendering it a bad faith filing. In its second chapter 11 case, LTL has entered into new financing arrangements that it claims adhere to the guidelines set forth by the Third Circuit in its dismissal opinion.
Notwithstanding its new financing arrangements, LTL faces the risk of opposition to its current filing, as well as another appeal to the Third Circuit. Falcon Rappaport & Berkman will continue to follow this case and provide updates to clients and colleagues.
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