(Bloomberg) -- Johnson & Johnson defeated an effort to stop it from using the so-called Texas two step bankruptcy strategy to rid itself of tens of thousands of asbestos poisoning lawsuits.
U.S. Bankruptcy Judge Laurie Silverstein refused to block the consumer products giant from taking corporate restructuring actions related to its asbestos liabilities and indemnity contracts given to the company's former talc supplier.
Asbestos victims, who claim they were made ill by tainted talc in J&J's baby powder, had accused the company of plotting to restructure itself using a Texas law that allows so-called divisive mergers. Under the Texas two-step bankruptcy strategy, a company reincorporates in Texas into two separate units. One unit gets most of the assets, while the other gets liabilities like asbestos lawsuits.
J&J never said it was planning to restructure as part of its legal strategy, but lawyers for the company fought efforts to block it from doing so.
Read more: Georgia-Pacific, Purdue Spats Give J&J Bankruptcy Options
Silverstein held a hearing Wednesday in the bankruptcy case of supplier Imerys Talc. Asbestos victims in that case claimed J&J was preparing to abandon its responsibilities to them by using the Texas two step strategy. On Thursday afternoon, she sided with J&J, ruling that creditors of Imerys Talc hadn't proved that J&J was violating rules meant to allow companies to reorganize in court.
The case is In Re Imerys Talc America Inc., 19-10289, U.S. Bankruptcy Court, District of Delaware (Wilmington). To see the docket on Bloomberg Law, click here.
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