Judge brings Johnson & Johnson closer to potential reorganization

Legislation & Litigation

Johnson & Johnson is set to offload its talc-related responsibilities to a new subsidiary that could eventually file for Chapter 11 bankruptcy and significantly alter the thousands of lawsuits the company faces.

A U.S. Delaware District Bankruptcy Court judge last week dismissed requests from a panel of personal injury attorneys to bar Johnson & Johnson from exercising that option.

J&J faces more than 34,000 lawsuits that link its talc-based products to cancer, the majority of which are ovarian cancer. A small fraction of these lawsuits relate to malignant mesothelioma.

Most lawsuits claim that the talc in the products was contaminated with toxic asbestos fibers.

By threatening to shift its talcum obligations into massive bankruptcy proceedings, J&J could better protect itself from pending jury trials, secure settlements and potentially save billions of dollars.

At this point, J&J continued to litigate in court and defend the safety of its products, citing numerous studies that showed no signs of contamination.

Recent J&J Case Worth $ 26.5 Million

While Johnson & Johnson has been successful in some cases, it has also lost many high-profile lawsuits.

Earlier this month, a state superior court jury in Alameda County, Calif., Awarded $ 26.5 million to a woman who said her mesothelioma cancer was caused by use lifetime of Johnson’s Baby Powder.

His lawyers cited scientific information detailing how asbestos contamination occurs, as well as court records from decades ago showing company officials were aware of the contamination.

In June, the United States Supreme Court rejected a request by J&J to consider overturning a Missouri appeals court ruling that awarded $ 2.1 billion to 22 women.

While J&J has not publicly said whether it will create a new corporation to consolidate the cases in bankruptcy court, the company has raised the issue during various settlement negotiations.

Johnson & Johnson subsidiary would cost plaintiffs

The prospect of plaintiffs receiving considerably less money in bankruptcy court than in negotiated settlements has alarmed personal injury attorneys and prompted the emergency motion in Delaware district court.

Judge Laurie Selber Silverstein, however, ruled against the petition and refused to prohibit the company from separating its talc responsibilities, a legal maneuver that has been used in the past by several companies facing large numbers. asbestos-related claims. One of them was Georgia Pacific LLC of Koch Industries Inc. in 2017.

A committee of attorneys also filed a similar request to block the maneuver in a Missouri state court, where another talcum powder case is pending.

“The court rightly dismissed the plaintiff’s motion to prevent J&J from engaging in a legitimate business transaction should it choose,” J&J attorney Diane Sullivan wrote in a company statement. . “This was another frivolous attempt by the plaintiffs’ emergency lawyers to try to force J&J to settle their cases as it continues to defend the safety of its products in court.”

Congress also wants answers from J&J

Johnson & Johnson is facing reluctance from a US House of Representatives oversight committee, which in August demanded any information regarding the company’s plans to create a subsidiary with the intention of declaring bankruptcy.

“We will carefully review Judge Silverstein’s decision and take our next steps,” Andy Birchfield, lead counsel for the plaintiff in the Delaware restraining order application, told The Wall Street Journal. “For now, that fight is moving to a Missouri court, where a judge will consider our urgent request to stop any abuse of bankruptcy planned by J&J.”

In the emergency claim in the Delaware court, attorneys alleged that any new affiliates created would negatively impact the ongoing reorganization of Imerys Talc America, a former supplier to J&J that declared bankruptcy in 2019.

Imerys’ bankruptcy plan involves funding for J&J, which could change if its talc obligations were to also go to bankruptcy court.

After losing several court cases, J&J announced in 2020 that it would end sales of talc-based baby powder in the United States and Canada, but has always insisted it was safe to use. He cited declining consumer demand and “misinformation” about product safety.