Judge rejects fraud claim over J&J talc bankruptcy maneuver

U.S. District Judge Michael A. Shipp dismissed a fraud lawsuit brought by five plaintiffs who alleged Johnson & Johnson used repeated corporate restructurings to shield talc-related liabilities from litigation. The suit, filed as Love v. Red River Talc, No. 24-cv-06320 in the District of New Jersey, accused Red River Talc, a J&J subsidiary, of repeatedly employing a so-called Texas two-step bankruptcy strategy to stall or resolve tens of thousands of claims.

Shipp grounded the dismissal on standing and causation, concluding the plaintiffs had not shown a cognizable injury traceable to the bankruptcy filings. The court held that “their claimed injury is entirely hypothetical, as it is contingent on plaintiffs' first prevailing in the talc litigation.” The opinion further reasoned that treating litigation delay alone as an injury would be “fundamentally incompatible with the structure and purposes of the bankruptcy code,” which provides for automatic stays to allow debtors to negotiate liability resolutions.

Plaintiffs argued the maneuver was designed to “hinder, delay, and defraud these women and prevent them from ever having their day in court,” claiming their individual talc cases were stopped from moving forward between October 2021 and March 2025. Counsel for the plaintiffs in the federal suit included Leigh O’Dell of Beasley Allen, Patricia Kipnis of Bailey Glasser, and Richard Golomb of Golomb Legal. Jessica Brennan of Barnes & Thornburg represented Red River Talc.

The ruling arrives against the backdrop of a sprawling multidistrict litigation before Judge Shipp that encompasses more than 67,000 talc lawsuits, most alleging ovarian cancer and some involving mesothelioma linked to asbestos. The Texas two-step, in which a company spins liabilities into a new subsidiary that then files for bankruptcy, has been central to efforts by corporations to isolate mass tort exposure. Courts have rejected the strategy three times, most recently in March, and a proposed $10 billion bankruptcy settlement tied to resolving the talc litigation ultimately collapsed after a judge found it lacked sufficient support from the women affected.

Johnson & Johnson has a mixed outcome record in talc litigation: it has won defenses in some trials but has also faced large adverse awards, including a $1.5 billion judgment in Baltimore in December. The company halted U.S. sales of talc-based baby powder in 2020 and ended global sales of talc powder in 2023, shifting to cornstarch-based alternatives.

Legal experts say Shipp’s ruling narrows a potential path for plaintiffs who sought to treat corporate use of bankruptcy as a standalone fraud. By requiring plaintiffs to first prevail on their underlying tort claims before recognizing injury from delay, the opinion reduces the leverage of an argument that repeated filings themselves amount to actionable fraud. The decision is likely to shape how future suits challenge corporate restructuring tactics and may prompt appellate scrutiny of the proper interplay between bankruptcy protections and mass-tort rights.

Key questions remain for talc claimants: whether the plaintiffs will amend or appeal the dismissal, and how appellate courts will balance bankruptcy policy against allegations that corporate maneuvers unjustly impede access to compensation. Meanwhile, the MDL continues to consolidate a vast docket of claims and will determine the practical contours of liability and recovery for thousands of plaintiffs.