Sept 19 (Reuters) – People suing Johnson & Johnson over the company’s talc products asked an appeals court on Monday to revive their claims, saying the profitable company should not be allowed to use a bankrupt subsidiary to block lawsuits that claim that the products cause cancer. They asked a Philadelphia-based panel of the U.S. 3rd Circuit Court of Appeals to dismiss J&J’s LTL Management subsidiary from bankruptcy, saying LTL is a “fabricated” company set up solely to prevent them from having their day in court. J&J ( JNJ.N ), which maintains its talc products are safe, spun off LTL in October, outsourced its talc liabilities to it and filed for bankruptcy days later. Sign up now for FREE unlimited access to Reuters.comSign up That restructuring strategy, known as the “Texas two-step,” halted some 38,000 lawsuits J&J was facing alleging its baby powder and other talc-based products contained asbestos and caused mesothelioma and ovarian cancer. Critics, including lawmakers and legal experts, say J&J’s bankruptcy maneuver could provide a blueprint for other major companies to avoid juries in mass tort lawsuits. Judge Julio Fuentes in Monday’s arguments asked cancer victim attorney Jeffrey Lamken whether the bankruptcy court could provide a more efficient resolution of claims than hearing cases one at a time in other courts. Lamken said the court should not make a blanket ruling on whether bankruptcy is “better” because its protections should be reserved for companies that are in financial trouble and need to reorganize. He argued that cancer victims should be able to sue because bankruptcy requires an overall settlement that must be reached through a lengthy court process before any individual case can be settled. LTL is under no pressure to move quickly because it has no business and is under no penalty from being in bankruptcy, Lamken said. David Frederick, who represents a separate group of cancer plaintiffs, said the bankruptcy allows LTL to pay out “less money, more slowly.” “Not a penny will be paid until the last appeal of the last naysayer is resolved,” Frederick said. But J&J has argued the bankruptcy court is allowing all current and future talc lawsuits to be settled together, which it says is the quickest and fairest way. Disputes in other courts create a huge variety of outcomes. Some plaintiffs will win large verdicts, while “most people won’t even get a turn off the bat,” with some dying before their cases go to trial, LTL attorney Neal Katyal said. The ongoing litigation also creates significant “dead weight” in attorneys’ fees and court costs, Katyal said. The company has set aside $2 billion to settle talc claims, which LTL executives describe as a starting point rather than a “cap.” Before filing for bankruptcy, J&J faced costs of $3.5 billion in judgments and settlements, including one in which 22 women were awarded a judgment of more than $2 billion, according to bankruptcy court filings. But more than 1,500 talc lawsuits have been dismissed without J&J paying anything, and the majority of cases that have gone to trial have resulted in defense verdicts, mistrials or judgments for the company on appeal, according to LTL courts. Cancer victims are asking an appeals court to overturn a New Jersey bankruptcy judge who allowed LTL’s bankruptcy to proceed. LTL’s bankruptcy filing automatically halted lawsuits against it, and U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey, ruled in February that LTL’s bankruptcy should also halt talc lawsuits against parent company J&J. Declining to dismiss the case, Kaplan said the bankruptcy court is better equipped to handle mass litigation than other courts. Sign up now for FREE unlimited access to Reuters.comSign up Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Sam Holmes Our Standards: The Thomson Reuters Trust Principles.
