J&J Damage Claims Fail to Prevent Potential Talk Bankruptcy

A Delaware judge declined to prohibit Johnson & Johnson from segregating talc-related liabilities from the rest of its company, speaking to personal injury lawyers who said they feared the company could file thousands of cancer claims in bankruptcy to try to secure settlements.

Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., did not prevent J&J Thursday from segregating talc liabilities from other assets, a business move that sees damages claims as a likely first step toward filing tens of thousands of tort claims in chapter 11.

In July, the healthcare company faced approximately 34,600 lawsuits linking its talc-based baby powder to ovarian cancer, asbestos cancer and other diseases. In settlement talks, the company has said it could isolate its talk obligations within a new corporate entity that could then file for bankruptcy, The Wall Street Journal reported last month.

Separating tort liabilities from corporate assets is possible under a Texas statute through what are known as divisions or divisive mergers. They have been used in recent years by several companies that have dealt with large numbers of asbestos claims to list those obligations in newly formed units which were then placed in Chapter 11.

J&J has disclosed no strategy for the talk lawsuits other than to defend the safety of its products in pending cases. The company has also not denied that a divisive merger for its talc obligations is a possibility, Judge Silverstein said earlier this week.