On Monday, January 30, the U.S. Court of Appeals for the Third Circuit denied Johnson & Johnson's attempt to use the bankruptcy system as a shield from liability for lawsuits that were filed alleging the company's talc products caused cancer. The highly-anticipated decision dismissed the bankruptcy filing and effectively revives thousands of lawsuits that had been filed by plaintiffs. The opinion references the work of Professor Ralph Brubaker, a bankruptcy scholar, on p. 46, where it states that the good-faith requirement applies to the entity in bankruptcy and not its affiliates. 

Brubaker also spoke to several news outlets in the wake of the decision, telling Bloomberg, "The J&J decision makes the Texas Two-Step bankruptcy a much less reliable strategy. Solvent entities using the bankruptcy process to resolve their mass-tort exposure is clearly up for grabs and raises profound issues that judges are and will continue to seriously struggle with."

Read the full opinion.

Read the Bloomberg article.