Court tosses bankruptcy petition by Johnson & Johnson's talc unit

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A federal appeals court has upended Johnson & Johnson's plan for resolving tens of thousands of lawsuits from consumers who claim the company's talc products cause cancer.

The Third Circuit U.S. Court of Appeals on Monday dismissed the Chapter 11 petition for LTL Management LLC, the spinoff J&J created, assigned its talc claims to and immediately placed in bankruptcy in October 2021.

Johnson and Johnson faces 38,000-plus lawsuits claiming its talc-based baby powder causes cancer. (Justin Sullivan/Getty Images / Getty Images)

J&J maintains that its talc-based products are safe and do not cause cancer, but has said it moved the 38,000-plus claims against it into the LLC as a way to handle the cases more efficiently than through individual trials.

But the three-judge panel agreed unanimously with claimants who called for the bankruptcy to be dismissed over allegations that it was "not filed in good faith."

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"We start, and stay, with good faith. Good intentions—such as to protect the J&J brand or comprehensively resolve litigation—do not suffice alone," the court wrote in its opinion. "What counts to access the Bankruptcy Code’s safe harbor is to meet its intended purposes. Only a putative debtor in financial distress can do so. LTL was not."

A Johnson and Johnson building in Irvine, California, Jan. 24, 2017. (Reuters/Mike Blake / Reuters Photos)

Johnson & Johnson did not immediately respond to FOX Business' request for comment on the ruling.

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The consumer-goods giant announced in 2020 that it would stop selling its talc Baby Powder in the U.S. and Canada, saying demand had fallen due to "misleading" information regarding the product's safety. Last summer, J&J said it would quit selling talc-based baby powder globally starting in 2023 and will instead switch to an entirely cornstarch-based line.

The company said it would stop selling talc-based baby powder in 2023. (Newscast/Universal Images Group via Getty Images / Getty Images)

The consumer lawsuits claim J&J's talc products caused cancer due to contamination with asbestos, a known carcinogen. J&J denies those allegations, and has said decades of scientific testing and regulatory approvals have shown its talc to be safe and that the product "does not contain asbestos and does not cause cancer."

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FOX Business' Sarah Rumpf and Reuters contributed to this report.

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