Johnson & Johnson is drawing criticism after using a controversial bankruptcy maneuver to block roughly 38,000 lawsuits linked to claims that its talc baby powder was contaminated with cancer-causing asbestos.<\/p>\n
The health products giant used a quirk of Texas state law to spin off a new company called LTL, then dumped all its asbestos-related liabilities including the avalanche of lawsuits into the new firm.<\/p>\n
LTL filed for bankruptcy last week in a federal court in Charlotte, N.C., a move designed to sharply limit efforts to recover damages for those who say they were harmed by J&J's baby powder.<\/p>\n
\"Johnson & Johnson doesn't have this liability anymore. They pushed all of it into the company they created just to file for bankruptcy,\" said Lindsey Simon, a bankruptcy expert at the University of Georgia School of Law.<\/p>\n
As a result, Simon said, \"consumers can't recover [damages] against a big solvent company. They have to recover against this smaller fictional company created [by J&J].\"<\/p>\n
The move sparked outrage from lawmakers and consumer advocates.<\/p>\n
\"J&J knew asbestos laced some bottles but kept it a secret for decades,\" Rep. Katie Porter, D-Calif., tweeted on Tuesday. \"Tens of thousands of women with ovarian cancer are suing, and the company wants to shield its assets.\"<\/p>\n
In 2018, separate investigations by Reuters and The New York Times revealed documents showing Johnson & Johnson fretted for decades that small amounts of asbestos lurked in its baby powder, without telling regulators.<\/p>\n
J&J has repeatedly denied the claim. The company remains one of the wealthiest corporations in the world, with more than $25 billion in cash reserves, and has not filed for bankruptcy.<\/p>\n
During a call with investors on Tuesday, J&J CFO Joseph Wolk defended the bankruptcy maneuver and again said its talc baby powder products, discontinued last year, were safe.<\/p>\n
\"There's an established process that allows companies facing abusive tort systems to resolve claims in an efficient and equitable manner,\" Wolk said.<\/p>\n
\"It's really the bankruptcy courts that will ultimately decide this. It's not plaintiff attorneys. It's not Johnson & Johnson,\" he added.<\/p>\n
In a separate statement, LTL said J&J had agreed to provide the new firm with $2 billion, along with other funds, for future payouts linked to baby powder asbestos claims.<\/p>\n
\"We are confident all parties will be treated equitably during this process,\" said John Kim, chief legal officer of LTL, in the statement.<\/p>\n
But Andrew Birchfield, an attorney with the firm Beasley Allen who represents women who have sued J&J, said this legal maneuver could make it far more difficult for his clients to recover damages.<\/p>\n
\"Women and families would be devastated, and it would just be a get-out-of-jail-free card for Johnson & Johnson,\" Birchfield said.<\/p>\n
J&J has had a mixed record defending itself against these talc-asbestos lawsuits.<\/p>\n
The company has prevailed in many cases, but last year an appeals court in Missouri ordered the firm to pay $2 billion to women who say J&J's talc product caused their ovarian cancer.<\/p>\n
Critics say this is another instance of a growing trend: corporations and wealthy individuals using bankruptcy to block lawsuits without actually filing for bankruptcy themselves.<\/p>\n
\"Another giant corporation is abusing our bankruptcy system to shield its assets and evade liability for the harm it has caused people across the country,\" Sen. Elizabeth Warren, D-Mass., tweeted last week.<\/p>\n
The American Association for Justice, a coalition of trial lawyers, also blasted J&J's maneuver and called for legislation to block this kind of legal tactic.<\/p>\n
\"There are countless Americans suffering from cancer, or mourning the death of a loved one, because of the toxic baby powder that Johnson & Johnson put on the market,\" the group said in a statement. \"Their conduct and now bankruptcy gimmick is as despicable as it is brazen.\"<\/p>\n
In recent months, legal scholars, bipartisan members of Congress and consumer advocacy groups have raised alarms about the use of bankruptcy courts by wealthy and powerful entities seeking to block lawsuits.<\/p>\n
Simon, at the University of Georgia, published a widely read paper in the Yale Law Journal in April that described wealthy companies like Johnson & Johnson as \"bankruptcy grifters.\"<\/p>\n
She argued such firms and organizations receive the benefits of Chapter 11 protection while \"incurring only a fraction of the associated burdens.\"<\/p>\n
Critics also say lax bankruptcy laws allow companies to \"venue shop,\" choosing to file for bankruptcy in federal jurisdictions viewed as friendly to corporations.<\/p>\n
In this case, Johnson & Johnson is headquartered in New Jersey, but these legal maneuvers have been executed in North Carolina and Texas.<\/p>\n
Similar legal strategies have been used in bankruptcy courts by members of the Sackler family who own OxyContin-maker Purdue Pharma, as well as by the U.S. Olympic Committee and the Boy Scouts of America, which face a barrage of sex abuse-related claims.<\/p>\n
Simon said this bankruptcy maneuver offers J&J significant advantages in negotiations that are likely to follow over a final settlement.<\/p>\n
But she said the company may still be on the hook for sizable payouts to victims as determined by the bankruptcy court.<\/p>\n
\"[J&J is] not completely wiping their hands of the issue, and I think probably awareness of how that would be perceived is the reason why,\" Simon said.<\/p>\n
Johnson & Johnson, meanwhile, has asked a federal bankruptcy judge to halt progress on talc-asbestos claims while LTL's bankruptcy filing is under review.<\/p>\n
Judge Craig Whitley will hold a hearing on that request on Friday in Charlotte. <\/p>\n
: 10\/20\/21<\/p>\n
An earlier version of this story misstated the name of Craig Whitley as Frank Whitney.<\/p>\n
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J&J is using a bankruptcy maneuver to block lawsuits over baby powder cancer claims - KRWG<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Johnson & Johnson is drawing criticism after using a controversial bankruptcy maneuver to block roughly 38,000 lawsuits linked to claims that its talc baby powder was contaminated with cancer-causing asbestos. Continue reading