Johnson & Johnson sends talc cases to bankruptcy court

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Legislation & Litigation

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As expected, Johnson & Johnson offloaded its growing talc-related responsibilities to a new subsidiary that filed for Chapter 11 bankruptcy protection on October 14.

The controversial decision, which has confirmed the fears of many personal injury attorneys, is J&J’s attempt to more easily resolve the thousands of pending and future lawsuits claiming its talc products have caused serious medical problems, especially ovarian cancer and mesothelioma.

Most claims claim that the talc in the products was contaminated with toxic asbestos fibers.

The filing, in the U.S. West District of North Carolina Bankruptcy Court, puts an immediate end to all legal proceedings in state and federal courts and will ultimately move all outstanding talc lawsuits to a bankruptcy judge. unique.

LTL Management LLC is the newly formed subsidiary that will inherit the business, allowing J&J to separate its immense profitability from its potential liabilities, which will be considerably smaller under bankruptcy protection. Johnson & Johnson is expected to save billions of dollars in the long run.

Lower regulations expected after J&J action

A panel of lawyers representing talc claimants had tried unsuccessfully to block the restructuring of the company. A U.S. Delaware district bankruptcy court refused to issue a restraining order against J&J in August.

The depot is expected to pressure plaintiffs to agree to lower settlements than they previously would have, stop jury verdicts, and avoid overpayment.

“It’s crazy. What is going on here is corporate crime like we have never seen before,” said attorney Daniel Wasserberg, a New York City trial attorney specializing in criminal cases. plaintiffs talc, at the Mesothelioma Center at Asbestos.com. “I love the United States of America, but it’s a sad day in this country when a mega-corporation like Johnson & Johnson can take responsibility for thousands of cases of cancer and death, stick them in a whole new “spin-off” in Texas, then bankrupt it a few weeks later, simply because the litigation is a nuisance to their hundreds of billions in profits each year.

The bankruptcy court will now determine how much to put in a trust fund so that LTL Management can potentially compensate current and future claimants. In the latest court case, J&J said it has already established a $ 2 billion trust.

There are now over 34,000 pending cases involving Johnson & Johnson’s talc products, including Johnson’s baby powder. The first talcum case filed against J&J dates back to 2014.

“We are taking these steps to provide certainty for all parties involved in the cosmetic talc business,” Michael Ullmann, executive vice president and general counsel of J&J said in a statement. “As we continue to be a strong advocate for the safety of our talcum cosmetic products, we believe that resolving this issue as quickly and effectively as possible is in the best interests of the company and all stakeholders. “

Until now, J&J had continued to plead numerous cases in court and defend the safety of its products while citing numerous studies that showed no signs of contamination. Other studies have shown traces of asbestos contamination.

Despite defending its products, J&J announced in 2020 that it would stop selling its iconic talc-based baby powder in the United States and Canada, citing a drop in customer demand due to safety concerns.

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Bankruptcy will likely cut talcum settlements

Although J&J has won many lawsuits, it has also lost several high-profile ones. In August, a California state superior court awarded $ 26.5 million to a woman who said her mesothelioma cancer was caused by lifetime use of Johnson’s Baby Powder.

In June, the United States Supreme Court rejected a request by J&J to consider overturning an earlier $ 2.1 billion judgment in Missouri involving 22 women with ovarian cancer.

According to court documents, settlements and verdicts over the past five years for J&J have reached $ 3.5 billion. Defense costs have been estimated at $ 1 billion.

J&J is far from the first company to use this reorganization strategy, which involves a pro-business law that allows the company to separate assets from liabilities.

Timber giant Georgia-Pacific used its subsidiary Bestwall in 2017 to limit its asbestos liability. Trane Technologies and Saint-Gobain are in the midst of similar bankruptcy restructuring efforts.

Johnson & Johnson is also still under close scrutiny by a U.S. House of Representatives oversight committee, which in August demanded any information regarding the company’s future bankruptcy plans.

“It stinks,” attorney Andy Birchfield, an Alabama-based plaintiff who represents talcum plaintiffs, said in a statement. “They claim their product is safe and then try to hide behind bankruptcy. J&J can run, but he can’t hide.

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