J&J can’t use bankruptcy to resolve talc-injury lawsuits, appeals court rules
The article does a bad job explaining what exactly J&J is trying to do here and what exactly the appeals court won't let them do.J&J's plan was to split into two pieces, which I'll call Goodco and Badco. Goodco got the operating assets, Badco got the talc liabilities and more or less immediately filed for bankruptcy. That's a maneuver that has come to be called the Texas Two-Step. However there's a very important missing piece that seems not to be covered by the article: in addition to the talc liabilities, Badco also got a funding agreement with Goodco, which gives Badco the right to be reimbursed by Goodco for any expenses incurred as a result of the talc liabilities, up to ~60 billion USD, or the value of Goodco, whichever is higher.So J&J's play here was not to outright shield their assets from being used to pay talc liabilities, but rather to force the liabilities to be determined by a single bankruptcy process in the near future, rather than tens of thousands of individual lawsuits that would trickle in over the next 100 years or so.The appeals court ruled that because of the funding agreement Badco is not in financial distress, and is therefore ineligible to file for bankruptcy. They did not rule either way as to whether the Texas Two-Step is legal.