Understanding Johnson & Johnson’s Bankruptcy Case

Johnson & Johnson Baby Powder

Johnson & Johnson is back in the news, after using a controversial bankruptcy maneuver in an attempt to avoid liability for tens of thousands of lawsuits.

Johnson & Johnson faces more than 38,000 lawsuits alleging that the company’s baby powder products contain asbestos and cause cancer. The company has never admitted wrongdoing, but it did stop selling its baby powder products in the US and Canada in 2020. Last year, a US court ruled that Johnson & Johnson would have to pay $2.1B in damages to the victims and surviving families who developed diseases after using the talcum powder products. Other juries have found J&J liable for their sale of asbestos-laden talcum powder products.

Initially, Johnson & Johnson responded to the lawsuits by arguing that there was no link between its baby powder products and cancer. But now, the company has changed its approach. Earlier this year, Johnson & Johnson took advantage of a Texas state law to set up a new spin-off company. Johnson & Johnson then strategically shifted all its asbestos-related liabilities and lawsuits into the new subsidiary, LTL Management LLC, which promptly filed for Chapter 11 bankruptcy. (A Chapter 11 bankruptcy allows a company to stay in business and restructure its debts). LTL Management was created to channel responsibility for the tens of thousands of baby powder-related lawsuits and is designed only to set up a bankruptcy trust claim system to limit the company’s financial liability. Johnson & Johnson did promise to put $2B into LTL to settle with the plaintiffs or comply with verdicts; that amount is about half of what Johnson & Johnson previously offered to settle almost all of the cases, and is merely a fraction of what juries could determine to be J&J’s liabilities.

Johnson & Johnson is one of the wealthiest corporations in the world, with a stock market value of about $430B and more than $25B in cash reserves. This giant corporation is abusing the US bankruptcy system in an attempt to shield its assets and evade liability for decades of corporate negligence. People developed serious diseases and died after using Johnson & Johnson’s baby powder products, and the company is trying to prevent plaintiffs from having their day in court and trying to ultimately pay far less in damages.

The American Association for Justice released a statement regarding Johnson & Johnson’s declaration of bankruptcy, saying, “There are countless Americans suffering from cancer, or mourning the death of a loved one, because of the toxic baby powder that Johnson & Johnson put on the market that has made it one of the most profitable pharmaceutical corporations in the world. Their conduct and now bankruptcy gimmick is as despicable as it is brazen. This is an unconscionable abuse of the legal system.

In early November 2021, the North Carolina judge in LTL Management’s Chapter 11 bankruptcy case moved the case from North Carolina to New Jersey – where Johnson & Johnson is headquartered and where most of the talcum powder lawsuits are filed. The judge also ordered a stay (a temporary suspension of proceedings) on talc-related lawsuits for two months, while the Chapter 11 case moves to New Jersey. Attorneys for the plaintiffs argue that the two-month stay is yet another delay in justice.

Also in November, Johnson & Johnson announced plans to break up the company, splitting its consumer health arm from its pharmaceutical division. Johnson & Johnson’s Chief Financial Officer says the split is not linked to the talc lawsuits or the company’s bankruptcy proceedings.

Johnson & Johnson needs to be held responsible for its decades of corporate negligence, and now, its abuse of the US bankruptcy system to avoid tens of thousands of baby powder victims. If you or someone you know has developed cancer after using a Johnson & Johnson product, please contact us at (888) 882-9002 or via our online contact page.

Ovarian Cancer / Talcum Powder,