Johnson and Johnson’s plan to get out of paying cancer victims has hit the wall. Numerous U.S.courts had previously found that the multi-billion dollar corporation was responsible for selling talc products they believed might be dangerous* to consumers who went on to develop cancer. Johnson & Johnson (J&J) had developed a plan** to get out of paying the money the courts already determined they owed their victims*** and to be free and clear of any future awards to victims. But now a three-judge panel has blown that plan wide open.
In September, 2022 we published a piece entitled, “The Plan to Screw Talc-Cancer Victims: J&J’s Texas Two-Step to Bankruptcy” which described the multi-billion dollar corporation Johnson & Johnson’s conniving plan to get out of paying victims what the Courts in existing lawsuits awarded them in their talc-cancer cases and to block future lawsuits. Their master plan was to create a subsidiary called, “LTL Management”, move all the talc-related assets and debt to LTL, and then have LTL file bankruptcy, which would automatically stop lawsuits from proceeding against the subsidiary company LTL and against Johnson and Johnson as the parent company. In short, the strategy uses a Texas law to split an existing company in two, creating the new subsidiary meant to shoulder the lawsuits, and then have that new company file bankruptcy.**** Though done previously by other corporations, this clever maneuver in such a public case would not only harm consumers and victims, but held the potential to upend corporate law. As the New Yorker put it, allowing such a maneuver would create a future where “the government has diminished power to enforce consumer-protection laws, citizens don’t get to make their case before a jury of their peers when those laws fail, and even corporations with long histories of documented harm will get to decide how much, if anything, they owe their victims.” (source)
Shortly after the news of Johnson & Johnson’s conniving plan to get out of paying cancer victims became public, the victims pushed back. (See our post: Talc-Cancer Victims Push Back Against J&J’s Conniving Plan to Rip Them Off,). And after hearing from the attorneys for the victims, a three-judge panel agrees with those victims. On January 30, 2023 a U.S. appeals court shot down Johnson & Johnson’s attempt to offload tens of thousands of lawsuits over its talc products into bankruptcy court. This is very big news in the business law world because the ruling marks the first major repudiation of an emerging legal strategy with the potential to upend U.S. corporate liability law. It is also very big news for the victims…
J&J’s plan hits the wall
The Circuit Court of Appeals has now ruled that Johnson & Johnson improperly placed its subsidiary into bankruptcy even though it faced no financial distress. J&J’s two-step sought to halt more than 38,000 lawsuits from plaintiffs alleging the company’s baby powder and other talc products caused cancer. But the decision by the U.S. 3rd Circuit Court of Appeals in Philadelphia this week dismissed the bankruptcy filed by the J&J subsidiary in 2021. Before the filing, J&J had faced costs of $3.5 billion in verdicts and settlements***. The bottom line: The appeals court ruling revives the victims’ lawsuits.
*A December 2018 a Reuters investigation revealed that J&J officials knew for decades about tests showing that the company’s talc sometimes contained traces of carcinogenic asbestos but kept that information secret and away from regulators and consumers. J&J has said publicly its talc does not contain asbestos and does not cause cancer, but see: The Baby Powder Cover Up: Manipulation of Scientific Evidence Helped J&J Cover Up Talc Risks for Decades
**Facing unrelenting litigation, J&J enlisted law firm Jones Day, which had helped other companies execute Texas two-step bankruptcies to address asbestos-related lawsuits. J&J’s plan was internally dubbed “Project Plato,” and employees working on it signed confidentiality agreements. A company lawyer warned them to tell no one, including their spouses, about the plan. (source)
*** See our previous posts:
Jury orders big corporation to pay up for selling toxic feminine hygiene products
Baby Powder-Cancer Link Leads to Another Big Verdict
Baby Powder-Cancer Risk Suit Yields Highest Verdict Yet
Another Baby Powder-Cancer Verdict Slams Johnson & Johnson
‘Overturn 2 Billion Dollar Talc Verdict’ say Johnson and Johnson Lawyers
****J&J is among four major companies that have filed so-called Texas two-step bankruptcies to avoid potentially massive lawsuit exposure.