J&J baby powder bankruptcy moved

Johnson & Johnson will have its baby powder bankruptcy moved to its home state of New Jersey, potentially threatening the consumer giant’s strategy for dealing with tens of thousands of lawsuits filed by women who say the product gave them cancer.

The transfer will be a new test of the plan known as the Texas Two Step in which J&J created a unit in Texas to hold all of the lawsuits, then moved that unit to North Carolina and placed it in bankruptcy. The strategy hasn’t yet been tested in New Jersey’s federal bankruptcy court.

At the same time, J&J won a short-term reprieve from the lawsuits when U.S. Bankruptcy Judge Craig Whitley ruled Wednesday to grant a 60day stay on the litigation.

When J&J placed its LTL Management unit in bankruptcy, the proceedings halted suits against LTL, but left non-bankrupt J&J exposed to some 38,000 lawsuits, some of which are nearing jury verdicts.

Whitley said in a court that he wanted to give the judge who takes over the case time to decide how to proceed. “I need to stop the litigation for a short period of time,” Whitley said. “Sixty days is what I have in mind.”

The move of venue gives critics a new chance to have the strategy thrown out, because federal law in New Jersey may be more favorable to them, Greg Gordon, J&J bankruptcy lawyer who helped developed the strategy, said in court.

LTL had argued that the case should stay in North Carolina because Whitley is considered the leading expert on the Texas Two Step strategy.

Gordon said the move may make the bankruptcy last longer and cost more.