As expected, Johnson & Johnson has filed (PDF) for bankruptcy protection for its newly created subsidiary, LTL Management, established to manage a mountain of lawsuits alleging that its talcum products cause cancer.
But plaintiffs aren’t having it. Lawyers representing more than 30,000 women who have brought the claims say they will resist the ploy.
“It seems inconceivable that bankruptcy involving a highly profitable $500 billion company could be contemplated, let alone become reality,” Andy Birchfield of Beasley Allen said in a statement. “It seems hypocritical that such a company could defend a product it claims to be safe, while seeking bankruptcy protection for marketing that same product it knew to be dangerous.”
The statement from the Alabama-based law firm came immediately after J&J announced its action, which has been anticipated since late August when a U.S. judge declined to issue a restraining order against the company. The tactic, commonly referred to as the Texas two-step, was first used by firms decades ago as a way to mitigate costs associated with asbestos claims.
“While we continue to stand firmly behind the safety of our talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the Company and all stakeholders,” J&J’s general counsel Michael Ullmann said in the company’s statement.
The goal of the filing is to resolve all claims “in a manner that is equitable to all parties including current and future claimants,” J&J said in its statement. To that end, the company has established a $2 billion trust for LTL and “revenue streams” valued at more than $350 million for “potential costs.”
Earlier this year in a Securities and Exchange Commission filing, the company estimated its talc-related liabilities at $3.9 billion. But in its statement, Beasley Allen puts the figure at $25 billion.
J&J filed the action in the Western District of North Carolina, a venue “considered responsive to companies seeking to shield themselves from legal claims brought about by their defective products,” Beasley Allen wrote.
"Right behind the Sacklers, the Boy Scouts and USA Gymnastics, here's another example of the wealthy and powerful using bankruptcy as a hiding place to protect their profits and avoid responsibility," Birchfield said in the statement.
J&J began to face talc litigation in 2017 with claims that its iconic baby powder caused conditions such as mesothelioma and ovarian cancer. J&J has had a mixed bag of success and failure defending itself against the claims.
The company also had a busy year settling opioid-related litigation. In July, the company agreed to pay $5 billion to resolve claims that it helped fuel a deadly opioid epidemic. A month earlier in another opioid settlement, J&J agreed to pony up $230 million to the state of New York.