Johnson & Johnson faces high-stakes hearing over 'Texas Two Step' talc strategy: report

As Johnson & Johnson faces tens of thousands of lawsuits claiming its talc powders caused users to develop cancer, the company is trying to defend itself with a legal maneuver called the "Texas Two Step." This week, the company faces a key hearing to determine the fate of that effort, Bloomberg reports.

A court in North Carolina has kicked off a hearing to determine whether to halt tens of thousands of lawsuits against J&J and retailers as the company's newly formed subsidiary goes through bankruptcy proceedings, according to the news service.

In October, Johnson & Johnson said it had created a subsidiary, LTL Management, to absorb the talc litigation liabilities and file for bankruptcy. In addition, J&J said it'd create a $2 billion trust to resolve the talc lawsuits.

Days later, J&J's subsidiary filed a motion in the bankruptcy court to try and halt the talc legal proceedings against its parent company. In the filing, the J&J unit argued the plaintiffs' pursuit of legal claims against J&J shouldn't be allowed under bankruptcy law. J&J has argued a $2 billion trust is an "equitable" way to resolve the litigation.

Attorneys for the plaintiffs point out that they represent tens of thousands of "women, many of whom waited for years to have their day in court, or the families of women who never lived long enough to see their day in court, or to see J&J face liability for its actions." 

RELATED: In talc case, reorg ruling goes Johnson & Johnson's way, keeping bankruptcy in play

"Now, on the precipice of J&J’s victims having that day in court, through the bankruptcy filing of its newly created affiliate ... J&J has sought to stay and derail the entirety of the [multidistrict] litigation," the lawyers wrote. 

The talc multidistrict litigation, centered in federal court in New Jersey, is finishing up discovery and is scheduled to head to trial in April 2022, the lawyers wrote.

After the ongoing hearing in bankruptcy court, Judge Craig Whitley will weigh the arguments and rule on whether to halt that litigation.

RELATED: Johnson & Johnson's last-ditch appeal of $2B talc verdict falls short at Supreme Court

Johnson & Johnson faces about 38,200 lawsuits alleging harm from talc, according to a new quarterly SEC filing. While the company has faced some big losses in court, it's been able to get some overturned in appeals.

That wasn't the case for its most significant talc loss, the $4.69 billion verdict handed down from a jury in St. Louis that was later reduced to $2 billion in appeals. J&J took that appeal effort all the way to the Supreme Court, but the justices rejected its appeal.