Johnson & Johnson defends Talc bankruptcy strategy called ‘rotten’ by cancer plaintiffs
A subsidiary of Johnson & Johnson was sued on Monday for trying to use the bankruptcy process to resolve tens of thousands of claims that its baby powder and other talc-based products caused cancer .
The subsidiary, LTL Management, is fighting to stay bankrupt, arguing it’s the best way to achieve a “fair, effective and consensual resolution” of more than 38,000 claims alleging J&J’s talc products have caused cancers, including mesothelioma. J&J maintains that its consumer talc products are safe.
J&J used a legal maneuver known as “Texas Two-Step,” which allows companies to separate valuable assets from liabilities through a so-called split merger.
Lawyers representing cancer patients say the bankruptcy filing is intended to delay and thwart lawsuits that would otherwise go directly to a jury trial against J&J.
“Basically, this case is rotten,” said Jeffrey Jonas, an attorney for one of the plaintiffs’ committees during Monday’s opening arguments.
Robert Wuesthoff, president of LTL Management, testified that it would be impossible to bring all the cases to court. Prior to LTL’s founding, J&J conducted about 10 talc trials per year, Wuesthoff said.
Most cancer plaintiffs would be better off resolving their claims in a bankruptcy settlement than hoping to join the âprivileged fewâ who won âlottery-sized rewardsâ in court trials. jury, he added.
As Reuters reported, J&J secretly launched “Project Plato” last year to shift responsibility for its ongoing talc lawsuits to the newly created subsidiary, which was then to file for bankruptcy.
If J&J wins bankruptcy court approval, such a strategy, while rarely used, could be adopted more widely by large companies facing liability, according to attorneys for the talc plaintiffs, as well as some legal experts.
Democratic lawmakers in the House of Representatives proposed a bill in July 2021 that would block the maneuver.
U.S. Bankruptcy Judge Michael Kaplan of New Jersey scheduled a five-day trial to consider an offer from the committees representing the plaintiffs to dismiss the bankruptcy case. Kaplan said he intended to govern before the end of the month.
No âfinancial distressâ
Plaintiffs’ attorneys argue that allowing LTL’s bankruptcy to proceed would unfairly limit payment to the $2 billion that J&J has offered to make available to those who have been harmed.
Brian Glasser, an attorney who represents mesothelioma claimants, said Monday that J&J settled 6,846 talc cases for $966 million before deciding to transfer those legal risks to LTL.
If J&J were to reach comparable settlements in the 38,000 talc cases pending against it, the company would have an estimated $5.5 billion unliability, which would not cause “financial distress” for a company the size of the company. from J&J, Glasser said.
“Just because Johnson & Johnson is both wealthy and fears reputational damage doesn’t mean Johnson & Johnson has the right to opt out of the jury system,” Glasser said.
Shares of J&J ended down 1.3% at $165.60.
Lawsuits against talc have been temporarily halted while J&J, whose market value exceeds $446 billion, awaits the outcome of LTL’s bankruptcy proceedings.
A 2018 Reuters investigation found that J&J had known for decades that traces of asbestos, which have been linked to mesothelioma, lurked in its baby powder and other talc-based cosmetics.
The company stopped selling baby powder in the United States and Canada in May 2020, in part due to what it called “misinformation” and “unsubstantiated claims” about the product. of talc.
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