As Johnson & Johnson readies its third attempt to resolve talc-related cancer litigation through bankruptcy, a spotlight has been cast on the issue of what constitutes a “good faith” filing in Chapter 11 cases. There is no standardized method of evaluating good faith filings in the US Bankruptcy Code, leading to varied interpretations across different courts.
This divergence was highlighted when the US Court of Appeals for the Third Circuit affirmed last month that a J&J subsidiary’s second Chapter 11 filing was not made in good faith. The court’s ruling centered on the determination that the company wasn’t in financial distress, which is a critical component in evaluating the legitimacy of the filing.
Legal professionals and corporate counsels are watching closely as this move unfolds, considering the broader implications for how future bankruptcy filings, especially those by large corporations, will be scrutinized. With circuits imposing their own interpretations of good faith, having a uniform rule for all cases seems impractical, according to legal experts.
For more detailed insights, you can read the full article on Bloomberg Law.