How the J & J Bankruptcy Could Affect Talc Cancer Lawsuits | Levin Papantonio Rafferty - Personal Injury Law Firm

How the J & J Bankruptcy Could Affect Talc Cancer Lawsuits

Plaintiffs in talc cancer lawsuits against Johnson & Johnson have had a white-knuckle time of it after hearing the company’s plans to file bankruptcy. If you are among the worriers, you should know that your legal action remains alive and well. However, J&J’s maneuverings could change some aspects of how your case is handled.

The multinational corporation—whose tagline for years was “Best for Baby—Best for You” —reached into a toolbox of legal tricks to spinoff a new company, LTL Management LLC, then proceeded to ditch all the talc-asbestos liabilities into the freshly hatched firm, according to a report from National Public Radio (NPR).  Legal communities refer to the strategy as the “Texas Two-Step.” After moving their corporate charter to Texas, a company wanting to side-step litigation then splits its business into a healthy-asset unit and a liability claim unit. According to Financial Times, other states would deem this type of move a “fraudulent transfer.”

On October 14, 2021, LTL filed for Chapter 11 bankruptcy protection. The J&J subsidiary announced that its parent company had agreed to establish a $2 billion trust to fund payments LTL might owe.

J&J CFO Joseph Wolk describes the company’s bankruptcy filing as legitimate. He also describes the strategy as being J&J’s response to “abusive tort systems”—one that would enable a swift and equitable resolution of claims.

That’s not how others are viewing the move. Rep. Katie Porter, D-Calif., tweeted that J&J is clearly trying to shield its assets, shirking its legal responsibility to the tens of thousands of women who allegedly developed ovarian cancer after using Johnson’s Baby Powder. The health products giant allegedly knew that its products contained asbestos—a revelation made public after a 2018 investigation by Reuters and The New York Times.

Although the talc powder lawsuits have not gone away, J&J’s shell game will affect how and from whom talc lawsuit plaintiffs recover damages.

Lindsey Simon, a bankruptcy expert at the University of Georgia School of Law, told NPR that the spinoff strips J&J of any liability for the talcum powder lawsuits. As a result, rather than recovering damages from a large, solvent company, plaintiffs would be squeezing damages “from this smaller fictional company created [by J&J]," Simon said.

Bloomberg talked a little about this on October 15, 2021. The article described J&J as “far from the usual user of Chapter 11 protection,” as author Steven Church explained that J&J is just one of two company’s that gets perfect credit ratings from both Moody’s and S&P. These ratings are based on their ability to pay bills. Church goes on to reveal that the J&J has around $25 billion in cash, on top of a $10 billion line of credit. These resources should be ample for the establishment of a proposed victims’ trust fund.

On October 20, 2021, a bankruptcy court judge began hearing J&J’s arguments for why bankruptcy is the right answer for resolving the thousands of talc lawsuits filed against the company.