Update (02/25/2022): Judge Michael Kaplan of the U.S. Bankruptcy Court in Trenton, N.J., sided with Johnson & Johnson in the case, according to numerous reports. He denied the plaintiffs’ request to block Johnson & Johnson’s bankruptcy plan, which allows the manufacturer to move forward with its subsidiary receiving all talc and asbestos legal liabilities.
The decision keeps individual lawsuits frozen and moves the Johnson & Johnson legal saga toward an asbestos trust fund.
“The Court is aware that its decision today will be met with much angst and concern,” Kaplan wrote in his decision, as reported by NPR. “The Court remains steadfast in its belief that justice will best be served by expeditiously providing critical compensation through a court-supervised, fair, and less costly settlement trust arrangement.”
The original story about the plaintiffs’ effort to thwart Johnson & Johnson’s “Texas Two-Step” legal maneuvering is below.
Johnson & Johnson is trying the “Texas two-step” legal approach to offload asbestos and talc cancer liabilities to a subsidiary company, which is bankrupt.
Cancer patients are fighting the action in New Jersey bankruptcy court, hoping to hold Johnson & Johnson accountable for tens of thousands of lawsuits related to its talcum powder products.
The battle around Johnson & Johnson’s attempt to evade mesothelioma lawsuits was in court last week, according to a Reuters article. U.S. Bankruptcy Judge Michael Kaplan held a five-day trial to consider a bid by a plaintiff committee to dismiss the bankruptcy move. If successful, the subsidiary of Johnson & Johnson would have to face current and future lawsuits.
What Johnson & Johnson Is Trying to Do
Johnson & Johnson created the subsidiary LTL Management, which is fighting to remain bankrupt. Johnson & Johnson also plans to shift all asbestos liabilities to this company. As a bankrupt company, LTL Management cannot be the target of asbestos lawsuits, instead creating an asbestos trust fund.
If this move is successful, an asbestos trust fund will be the main type of compensation from Johnson & Johnson cancer lawsuits.
Many companies file for bankruptcy and create asbestos trust funds when they are swarmed with mesothelioma lawsuits. Some companies attempt the “Texas Two-Step” maneuver, called a “divisive merger”, to diminish the financial effect while continuing operations. This is what many experts accuse Johnson & Johnson of attempting.
Asbestos trust funds typically pay claimants less in compensation than lawsuits settlements or verdicts. Johnson & Johnson has been on the losing end of multiple mesothelioma lawsuits in the millions of dollars in verdict. Last year, Mesothelioma Guide reported Johnson & Johnson was considering this bankruptcy approach.
After LTL Management filed for bankruptcy and the case was brought to North Carolina bankruptcy court, a judge paused it for 60 days toward the end of 2021. The case then moved to New Jersey, which is typically more strict about using the Texas Two-Step action.
Johnson & Johnson, Talc, Asbestos and Mesothelioma
The responsibility rests in Johnson & Johnson’s use of talc for healthy and beauty products. Johnson & Johnson Baby Powder is the most well-known example. The health risk occurs when asbestos, a mineral like talc, contaminates the mixture. Asbestos can pierce tissue linings and cause mesothelioma, ovarian cancer and lung cancer.
In short, asbestos and talc cause mesothelioma.
The subsidiary, LTL Management, is fighting to remain in bankruptcy, arguing that is the best way to reach an “equitable, efficient, and consensual resolution” of more than 38,000 claims alleging that J&J’s talc-based products caused cancers including mesothelioma. J&J maintains that its consumer talc products are safe.
Reuters reported there are approximately 38,000 talc cancer cases pending against Johnson & Johnson. The liability is around $5.5 billion. However, the LTL subsidiary proposed a $2 billion cap for the asbestos trust fund. Johnson & Johnson has reportedly paid nearly $1 billion to victims of its talc products – in fewer than 7,000 cases.
Johnson & Johnson ended production of Baby Powder in the United States and Canada in 2020. Lawmakers and activist groups hope for an outright ban of asbestos in the United States, which would prevent the return of shelved talc commercial items from Johnson & Johnson or other corporate giants.
Sources & Author
- Johnson & Johnson defends talc bankruptcy strategy called ‘rotten’ by cancer plaintiffs. Reuters. Retrieved from: https://www.reuters.com/business/healthcare-pharmaceuticals/johnson-johnson-defend-talc-bankruptcy-court-2022-02-14/. Accessed: 02/15/2022.
- Johnson & Johnson wins a key court battle in baby powder case. NPR. Retrieved from: https://www.npr.org/2022/02/25/1083061992/johnson-johnson-wins-court-battle-bankruptcy-baby-powder. Accessed: 02/25/2022.
Sources & Author