Johnson & Johnson (NYSE:JNJ) (J&J) has reportedly had a bankruptcy petition dismissed by a US appeals court, dealing a blow to the healthcare giant's efforts to settle billions of dollars in legal claims over allegations that its talcum powder causes cancer.
According to the Financial Times and Reuters, J&J's subsidiary, LTL management had sought to file for bankruptcy in an effort to transfer thousands of legal claims from trial courts to the bankruptcy system.
The company was attempting to use the "Texas two-step" manoeuvre, which involved dividing the company into two separate businesses, with one of the businesses, which is facing over 40,000 cancer claims, filing for bankruptcy.
The court, however, ruled that only companies facing financial distress can take advantage of the bankruptcy system for restructuring purposes.
The company may now face decades-long civil court battles, potentially costing it billions of dollars, as it risks fighting cancer claimants in civil courts.