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J&J Baby Powder Bankruptcy Strategy Gets Final Test in February

(Bloomberg) — Johnson & Johnson should know by the end of next month whether its controversial use of bankruptcy to try to resolve billions of dollars in cancer claims can proceed, or if the consumer products giant must fight roughly 38,000 lawsuits individually.

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U.S. Bankruptcy Judge Michael B. Kaplan said in court Friday that he will rule by Feb. 28 on a demand to throw out the bankruptcy case filed by a J&J unit responsible for paying claims related to allegations that its baby powder causes certain cancers.

“We can then see where this case is going by the end of February,” Kaplan told lawyers for J&J and attorneys representing tens of thousands of women who say they got ovarian cancer from using baby powder.

J&J created a unit called LTL Management and put it in bankruptcy to resolve all current and future baby powder lawsuits. All of the lawsuits are temporarily on hold while the bankruptcy case continues. Kaplan will hold a multiday trial starting Feb. 14 to decide whether the bankruptcy should be thrown out.

Should Kaplan allow the bankruptcy to continue, LTL would be able to set up a trust funded by J&J that would pay current and future baby powder claims. The company has proposed put at least $2 billion into such a trust. Lawyers for baby powder claimants say they want to proceed with the lawsuits instead of negotiating about the size of a trust fund in bankruptcy.

The biggest baby-power lawsuit the company lost resulted in a more than $2 billion judgment against J&J that was appealed all the way to the U.S. Supreme Court. After that ruling, the company moved to try to resolve all the claims in bankruptcy instead of facing thousands of trials around the country.

J&J has repeatedly defended the bankruptcy, arguing it complies with all state and federal laws and was designed to help pay all alleged victims. J&J also denies that baby powder is a health hazard.

The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte)

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