J&J Launches Talc Subsidiary to Take Brunt of Liability

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Facing thousands of lawsuits related to its talc-based products, life sciences giant Johnson & Johnson is launching a separate subsidiary dubbed LTL Management LLC that will take the brunt of potential legal liabilities. With its launch, LTL filed for bankruptcy to mitigate potential liabilities.

For some time, opponents anticipated the move and previously attempted to halt J&J’s attempts. The formation of a company to absorb liabilities is being done under a Texas law that allowed for a “divisive merger,” a legal maneuver that provides a pathway for a company to split into two entities. It is a strategy other companies facing asbestos litigation have used in the past.

With the formation of LTL, multiple lawsuits in various courts across the country have now been funneled into the U.S. Bankruptcy Court. Now, a single judge could rule on potential lawsuit payouts.

Attorneys for cancer patients who have attempted to link their disease to their use of the J&J talc-based products sought to issue a restraining order against any attempt to spin out a separate business entity. In August, U.S. Bankruptcy Judge Laurie Selber Silverstein halted some of those preemptive attempts from plaintiffs.

Until the launch of LTL Management, Johnson & Johnson Consumer Inc., also a subsidiary of the life sciences giant, had overseen the company’s talc-based business.

J&J said the formation of LTL Management and the Chapter 11 filing are intended to resolve all claims related to the talc lawsuits in a “manner that is equitable to all parties, including any current and future claimants.” J&J General Counsel Michael Ullmann said the company undertook the formation of the subsidiary to bring “certainty” to all parties in the talc cases.

“While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the company and all stakeholders,” Ullmann said in a statement.

LTL Management has been fully funded to amounts determined by the U.S. Bankruptcy Court. Additionally, the company established a $2 billion trust to cover additional expenses. J&J also noted that the subsidiary had been allocated royalty streams from undisclosed assets to provide another $250 million to contribute to potential liability payments.

In its natural form, some talc contains asbestos, a substance known to cause cancers in and around the lungs when inhaled, according to the American Cancer Society. J&J faces more than 30,000 different lawsuits related to its talc products. In 2018, BioSpace cited a Reuters report that showed the life sciences giant knew its talc products could contain carcinogenic asbestos. Despite that knowledge, the company opted to prevent that information from becoming known to regulators and the general public, according to the report.

The company has already been hit with multiple verdicts in talc-related cases, including $750 million in punitive damages awarded to four people who alleged the talc led to their own cancer diagnoses in 2020. Other verdicts include an award of more than $21 million after it was noted that asbestos found in the talc was linked to her development of mesothelioma in a patient. Another jury awarded almost $4.7 billion in damages to 22 women and their families. In that case, it was determined that J&J’s talc products contributed to the development of ovarian cancer. Six of those plaintiffs died from the disease.

J&J noted in its announcement that the formation of LTL is not an admission of liability in the ongoing lawsuits. J&J said it has won the majority of its talc-related trials and believes that none of the claims against the company have merit.

“With the financial backing of Johnson & Johnson, coupled with a dedicated trust and significant financial resources supporting LTL, we are confident all parties will be treated equitably during this process,” J&J Chief Legal Officer of LTL John Kim said in a statement.

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