In a monumental decision that could permanently reshape corporate accountability in mass tort litigation, a Houston bankruptcy court rejected Johnson & Johnson’s (J&J) $10 billion talc settlement plan. The ruling, handed down by U.S. Bankruptcy Judge Christopher Lopez on March 31, 2025, has not only thrown J&J’s litigation strategy into disarray but also restored the right of tens of thousands of cancer victims to pursue justice through individual trials.
As we wrote about in a previous blog post, J&J had proposed a massive bankruptcy trust to settle ongoing claims involving its talc-based baby powder and its alleged link to ovarian cancer and mesothelioma. You can revisit that detailed overview here:
👉 J&J Talc Bankruptcy Settlement Faces Scrutiny
Recap of the Proposed $10 Billion Bankruptcy Plan
Johnson & Johnson’s bankruptcy strategy was built on a controversial foundation known as the “Texas Two-Step.” Under this legal maneuver, J&J created a subsidiary called LTL Management and transferred all talc-related liabilities into it. LTL then filed for bankruptcy, seeking to shield J&J from future jury trials while offering a $10 billion trust to resolve all claims.
This move sparked outrage among plaintiffs and advocacy groups who argued the company was trying to sidestep accountability, especially since J&J remained financially robust.
Judge Lopez’s Ruling: What Happened in Court
In his decision, Judge Lopez made it abundantly clear that LTL Management—and by extension, J&J—was not in sufficient financial distress to warrant protection under Chapter 11 bankruptcy. He emphasized that allowing such a maneuver would “stretch the limits of bankruptcy law beyond recognition.”
This rejection marks the third time courts have blocked J&J’s efforts to resolve talc claims through bankruptcy court.
📰 Read more:
• Reuters: U.S. Judge Rejects J&J’s $10B Baby Powder Settlement
• Bloomberg: J&J Effort to Use Bankruptcy Rejected
A Corporate Shield Falls: What This Means for Victims and the Law
Johnson & Johnson’s legal structure, built around the so-called “Texas Two-Step,” was a calculated attempt to offload talc-related liabilities into LTL Management and place that entity into bankruptcy, thereby pausing thousands of lawsuits. While strategically sophisticated, courts across the country—including this one—have now labeled this approach a misuse of bankruptcy protections. Judge Lopez called out the maneuver as fundamentally inconsistent with the purpose of Chapter 11, arguing it could set a dangerous precedent for solvent companies to dodge mass tort litigation.
The court zeroed in on the financial reality behind J&J’s filings. With access to virtually unlimited capital and continued profitability, the judge found LTL lacked the financial distress needed to qualify for bankruptcy protection. In short, J&J was too rich to be bankrupt—a company cannot seek bankruptcy just to avoid jury trials and cap its liabilities. This ruling affirms that bankruptcy protections should remain tools for struggling businesses, not litigation management strategies for corporate giants.
For the more than 40,000 claimants—many suffering from ovarian cancer and mesothelioma—the ruling was a long-awaited validation. These victims, many of whom had faced years of delays and legal uncertainty, can now pursue justice in courtrooms nationwide. Plaintiffs’ attorneys hailed the decision as a critical win for civil justice and a strong rebuke of corporate efforts to evade accountability. While J&J maintains its talc products are safe and is reportedly considering an appeal, this ruling makes one thing clear: even the most powerful corporations are not above the law.
Stay informed on the latest developments and explore our posts on the talc trial here:
👉 J&J Talc Bankruptcy Settlement Under Scrutiny
