Jurist Noted for Bankruptcy Expertise Will Weigh J&J Talc Appeal
Johnson & Johnson’s use of bankruptcy to shift mass talc lawsuits against the company to chapter 11 will meet its most serious test yet before a federal appeals judge whose influential bankruptcy rulings shape one of the nation’s top corporate restructuring hubs, WSJ Pro Bankruptcy reported. Judge Thomas Ambro sits on the three-judge panel that will hear arguments Monday in a Philadelphia courtroom over an emerging corporate restructuring strategy where companies facing mass personal-injury litigation use a Texas law to create a new subsidiary with minimal business operations and make it responsible for tort liabilities before filing for bankruptcy. The chapter 11 filings by Johnson & Johnson subsidiary LTL Management LLC and others have carried more than a quarter-million personal-injury claims nationwide into bankruptcy court in recent years, stopping further trials on those claims in the civil justice system. J&J’s case has divided bankruptcy specialists and the appeal’s outcome could determine whether the consumer-health giant’s legal strategy could potentially be used more widely by other businesses facing expansive, and costly, personal-injury litigation. Judge Ambro spent more than 20 years practicing bankruptcy law in Wilmington, Del., before assuming his judgeship on the Third U.S. Circuit Court of Appeals in 2000. His background as a bankruptcy practitioner is a rarity among judges in the federal appeals courts, making him an authoritative voice on thorny legal problems arising from complex chapter 11 cases. [as reported by American Bankruptcy Institute on 9/19/22] This tactic that Johnson & Johnson is trying to use, is known in bankruptcy slang as the “Texas Two-Step”, as it was first used in bankruptcy cases filed in bankruptcy courts located in Texas. The view of attorney Kathleen March Esq of The Bankruptcy Law Firm, PC is that this tactic should be held illegal, because it prevents creditors from reaching money of the parent corporation, that the creditors could reach, but for use of the “Texas Two-Step”.