A federal judge dismissed a fraud lawsuit on January 29 filed by five women with cancer who alleged Johnson & Johnson deliberately used a bankruptcy maneuver known as the “Texas two-step” to place billions of dollars beyond their reach and prevent them from having their day in court.
U.S. District Judge Michael Shipp, sitting in New Jersey, ruled that the plaintiffs could not establish they had been harmed by the delays resulting from J&J’s bankruptcy strategy, which stretched from October 2021 to March 2025.
What the Plaintiffs Alleged
The five women accused J&J of fraud, contending the company engineered a corporate restructuring specifically to obstruct their ability to recover damages in civil litigation over talc-containing products.
The plaintiffs alleged J&J’s strategy was designed to “hinder, delay, and defraud these women and prevent them from ever having their day in court.” They argued that nearly four years of bankruptcy-related delays constituted cognizable harm in itself.
J&J executed the Texas two-step by creating a subsidiary called Red River Talc LLC, transferring its talc liabilities to that entity, and then placing the subsidiary into Chapter 11 bankruptcy protection. The tactic has drawn scrutiny from plaintiff attorneys, legal academics, and some members of Congress who argue it allows solvent companies to limit payouts to people injured by their products.
Why the Judge Dismissed the Case
Judge Shipp found that the harm the women described was too speculative to support a fraud claim. He wrote that “their claimed injury is entirely hypothetical, as it is contingent on plaintiffs’ first prevailing in the talc litigation.”
Shipp also held that treating delay alone as an injury would be “fundamentally incompatible with the structure and purposes of the bankruptcy code.” The ruling did not address the underlying merits of the talc claims.
The Texas two-step is a corporate restructuring strategy in which a company splits into two entities, assigns its liabilities to one of them, and then places that liability-holding entity into bankruptcy. Critics argue the tactic allows solvent parent companies to limit compensation for people harmed by their products.
Reactions
Patricia Kipnis, the attorney representing the five women, said they “disagree with the decision and will be reviewing it with our clients to discuss an appeal.” No timeline for a potential appeal was announced.
Erik Haas, J&J’s worldwide vice president of litigation, said the court correctly rejected what he described as “wholly meritless claims.”
J&J has maintained throughout the litigation that its talc products are safe, do not contain asbestos, and do not cause cancer. Tens of thousands of women have alleged the products contained asbestos and caused ovarian cancer and other cancers.
What Comes Next
The dismissal does not affect the underlying talc claims pending in the MDL before Judge Shipp. Those cases, numbering more than 67,000, involve allegations that J&J’s talc-based products caused ovarian cancer and other cancers in women who used them over many years.
The plaintiffs’ attorney indicated the legal team is evaluating an appeal of the fraud ruling. The outcome of any appeal could influence how courts assess similar challenges to the Texas two-step strategy in other mass tort bankruptcies.
What is the Texas two-step bankruptcy strategy?▼
The Texas two-step is a corporate maneuver in which a company divides into two entities, assigns its litigation liabilities to one of them, and then files that liability-bearing entity for Chapter 11 bankruptcy. In J&J’s case, the company created a subsidiary called Red River Talc LLC to hold its talc-related liabilities before filing for bankruptcy protection.
Why did Judge Shipp dismiss the fraud lawsuit?▼
Judge Shipp ruled that the five plaintiffs could not show they suffered a concrete injury from the bankruptcy delays. He wrote that any harm was hypothetical because it depended on the plaintiffs first winning their underlying talc litigation. He also said treating delay as injury would conflict with the structure and purposes of the bankruptcy code.
Does this ruling affect the broader talc lawsuits against J&J?▼
No. The dismissed fraud lawsuit was separate from the underlying talc product liability claims. More than 67,000 talc lawsuits consolidated in multidistrict litigation remain pending before Judge Shipp and were not affected by this ruling.
What has J&J said about its talc products?▼
Johnson & Johnson has maintained that its talc products are safe, do not contain asbestos, and do not cause cancer. Tens of thousands of women have disputed those claims, alleging the products contained asbestos and caused ovarian cancer and other cancers.
References
Reuters. (2026-01-29). US judge tosses lawsuit accusing J&J of fraud over talc bankruptcy strategy.
https://www.reuters.com/sustainability/boards-policy-regulation/us-judge-tosses-lawsuit-accusing-jj-fraud-over-talc-bankruptcy-strategy-2026-01-29/