A federal judge has ruled that thousands of baby powder cancer lawsuits may not be immediately halted despite a bankruptcy maneuver by defendant Johnson & Johnson.
Billions in Damages Already Paid
Personal injury attorneys have filed tens of thousands of baby powder cancer lawsuits against Johnson & Johnson on behalf of seriously ill clients. The suits allege that the company’s baby powder and other talc-based products contained asbestos, resulting in cases of ovarian cancer and mesothelioma in regular users.
While Johnson & Johnson has prevailed in a number of these claims, it has incurred significant losses in many others. In 2020, for example, the Missouri Supreme Court ordered the company to pay $2.12 billion to twenty women suffering from ovarian cancer.
Faced with the prospect of additional negative outcomes in approximately 38,000 additional baby powder cancer lawsuits, Johnson & Johnson has moved to take advantage of a Texas law to shield itself from liability.
“Texas Two-Step Bankruptcy”
Johnson & Johnson’s strategy involves a contentious legal maneuver known as a “Texas two-step bankruptcy,” which has been used by other companies facing asbestos litigation. During that process, a less valuable subsidiary, Johnson & Johnson Consumer Inc., was split in two in a “divisional merger.” That transaction created LTL Management LLC, into which the health products conglomerate dumped its asbestos-related liabilities, including thousands of pending baby powder cancer lawsuits.
On Oct. 14, 2021, LTL filed for bankruptcy in a federal court in Charlotte, NC. According to the filing, the company’s defense costs have approached $1 billion, while settlements and verdicts in the baby powder cancer lawsuits have cost it about $3.5 billion more.
Johnson & Johnson requested that all talc-asbestos suits be halted while LTL navigates bankruptcy proceedings. Meanwhile, Johnson & Johnson itself – which remains one of the wealthiest corporations in the world, with more than $25 billion in cash reserves and a market value exceeding $400 billion – has not filed for bankruptcy.
“Unconscionable Abuse of the Legal System”
In a separate statement, LTL said that Johnson & Johnson would provide the new firm with $2 billion, along with other funds, for future payouts related to baby powder cancer lawsuits.
“We are confident all parties will be treated equitably during this process,” said John Kim, chief legal officer of LTL.
Plaintiff attorneys and other critics have cried foul, arguing that these actions are part of a growing trend of corporations and wealthy individuals using bankruptcy to block lawsuits without actually filing for bankruptcy themselves.
Linda Lipsen, chief executive of the American Association for Justice, said that Johnson & Johnson’s “bankruptcy gimmick is as despicable as it is brazen” and “an unconscionable abuse of the legal system.”
Sen. Elizabeth Warren tweeted that “Another giant corporation is abusing our bankruptcy system to shield its assets and evade liability for the harm it has caused people across the country.”
As the critics have noted, the company’s two-step bankruptcy maneuver effectively shifted the baby powder cancer lawsuits from courtrooms across the country to a single legal proceeding before a federal bankruptcy judge with the power to force a settlement. In fact, Reuters reported that Johnson & Johnson attempted to use the threat of bankruptcy to its advantage during earlier settlement discussions. An attorney for the company warned plaintiffs’ lawyers that such a plan might result in lower payouts for cases that did not settle beforehand.
In response to the looming threat, the victims’ attorneys unsuccessfully asked multiple judges to forbid Johnson & Johnson from taking these actions in the weeks leading up to its bankruptcy filing.
Halt on Baby Powder Cancer Lawsuits Rejected
Despite the challenges posed by Johnson & Johnson’s scheme, a recent judicial ruling may provide some hope for plaintiffs.
On Oct. 22, U.S. Bankruptcy Judge Craig Whitley rejected the company’s request for a temporary halt on talc-asbestos claims while LTL undergoes bankruptcy proceedings.
LTL attorney John Kim testified in court that Johnson & Johnson Consumer Inc. – the division from which LTL was split – became responsible for all talc claims after a December 1978 restructuring. But when pressed by plaintiffs’ attorneys, Kim admitted that two separate searches failed to turn up “key documents” proving that assertion.
In light of this “troubling” failure to produce the documents, Judge Whitley said that he would not stop cases – including some that may be nearing a jury verdict – against parent company Johnson & Johnson, though he did agree to halt lawsuits involving LTL because it automatically qualifies under Chapter 11 rules.
The welcome relief for plaintiffs may prove short-lived, however. Judge Whitley said he will consider giving Johnson & Johnson a longer-term shield when the parties return for a hearing on Nov. 4, during which the company may be able to provide more evidence to support its position.
Fighting for Consumers Against Corporate Giants
Far too often it feels like the average person is powerless against the corporate giants of the world, who exploit loopholes in the system to evade liability for their negligent actions. Nevertheless, a capable attorney with meticulous attention to detail can make all the difference, even in the face of seemingly insurmountable odds. For this reason, if you or your loved ones have been seriously hurt by a dangerous consumer product, consider doing what so many others have done before you and reach out to the dedicated personal injury attorneys at GWC Injury Lawyers LLC.
With over $2 billion recovered in verdicts and settlements, GWC is one of the premier Personal Injury and Workers’ Compensation law firms in Illinois. For more than four decades, our personal injury attorneys have been fighting to ensure that no company is too big to hold itself above the law. GWC has the experience, the determination, the resources, and the reputation needed to get you and your family the justice you deserve.