J&J Bankruptcy Move Calls for Some Communication

Thom Weidlich 10.21.21


Johnson & Johnson’s latest maneuver in its long fight against claims its talc-based baby powder causes cancer is going to challenge its reputation. Yes, many see the move as gutsy. But others view it as cowardly — and that’s not something the company can ignore.

On Oct. 14, in a play predicted and feared by plaintiffs for months, J&J announced it had spun off its talc liabilities into a subsidiary called LTL Management LLC, which — presto! — was placed into bankruptcy. That halts the talc lawsuits against the company, currently numbered at more than 30,000.

J&J couched the move in terms of streamlining the claims process in an “equitable” manner. “We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases,” J&J General Counsel Michael Ullmann said in the press release.

It’s possible the strategy will simplify the process for all concerned. It will also encourage claimants to settle, probably for less.

Assuage Fears

J&J tried to assuage those fears. The consumer-products giant said it would provide funding so LTL Management can pay claimants what the bankruptcy court says it should. The parent set up a $2 billion trust toward that purpose. That’s a lot of money, but the talc settlements and awards already total about $3.5 billion — though the company has also won many jury verdicts. (In June, the U.S. Supreme Court refused to hear the appeal of a $2.1 billion award, which likely encouraged the Chapter 11 filing.)

In its announcement, J&J reiterated its longtime position that its talc-based baby powder, which it said last year it would stop selling in the U.S. and Canada, doesn’t cause cancer, including ovarian and mesothelioma cancer.

But what the company should be prepared for is the backlash against the move. In addition to the bankruptcy filing itself, J&J is accused of forum shopping by filing in North Carolina when it’s based in New Jersey. Then LTL, in court papers Monday, said it believes the “automatic stay” halting lawsuits also applies to the parent company. That’s sure to give rise to some objections, and we don’t mean only inside the courtroom.

‘Corporate Giant’

We’re already hearing grumbling. “Once again, a corporate giant is seeking to exploit a loophole in the bankruptcy system to evade accountability for the harm inflicted on American families,” two Democratic House members sponsoring a bankruptcy-reform bill said in a statement.

And then there’s the not-unexpected opposition of plaintiffs’ lawyers. “This stinks,” Andy Birchfield of the high-profile Alabama-based firm Beasley Allen said in a statement. “They claim their product is safe and then attempt to hide behind bankruptcy.”

Photo Credit: Nonowon/Shutterstock

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