US: Third U.S. Circuit Court of Appeals Issues Landmark Ruling Dismissing Chapter 11 Case of Johnson & Johnson Subsidiary
On January 30, 2023, the Third U.S. Circuit Court of Appeals issued a landmark ruling dismissing the Chapter 11 case of LTL Management, a Johnson & Johnson subsidiary, as a bad-faith filing. The court emphasized that LTL was not in “financial distress” when it filed Chapter 11 due to a $61.5 billion “backstop” funding agreement with Johnson & Johnson. This ruling is a major blow to the popular “Texas Two-Step” strategy frequently utilized to isolate mass liabilities with a newly created entity without assets. As a result of similar high-profile Chapter 11 cases, such as Purdue Pharma, there has been great [...]