Tens of thousands of legal claims that alleged that Johnson & Johnson’s Baby Powder and other talc-based products were responsible for causing cancer were put in bankruptcy by the company, with the potential liabilities being transferred to a subsidiary that has been recently formed by it.
According to the company and court records, J&J put the talc claims into an entity called LTL Management LLC, which filed for bankruptcy protection in North Carolina on Thursday. The bankruptcy filing did not include J&J or its affiliates.
Thousands of people have claimed that J&J’s Baby Powder and other talc products contained asbestos and caused cancer. The allegations have been denied by the company. Women with ovarian cancer and others with mesothelioma are among the plaintiffs.
J&J went through a contentious legal manoeuvre known as a Texas two-step bankruptcy on Thursday, for a corporate reshuffle, and this legal strategy has been used by other companies that are also facing asbestos related litigations.
A J&J business was broken up into two under this process, which was referred to as a “divisional merger” under Texas law. According to court papers filed Thursday, that transaction created LTL, a new entity tasked with J&J’s talc liabilities.
While LTL moves through the bankruptcy proceedings, the talc cases will be halted, according to J&J, which has a market value of more than $400 billion.
According to bankruptcy court filings made on Thursday, the legal fees for the company for defending almost 40,000 cases have topped $1 billion. J&J has spent an additional $3.5 billion on settlements and verdicts.
“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 a statement.
“While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the (company) and all stakeholders,” Ullmann added.
The bankruptcy filing was denounced by plaintiffs’ lawyers. In a statement, Linda Lipsen, chief executive of the American Association for Justice, a trial lawyers’ group, said J&J’s “bankruptcy gimmick is as despicable as it is brazen” and “an unconscionable abuse of the legal system.”
With an initial advance of $2 billion, J&J said it would finance legal costs for LTL for talc cases in an amount determined later by a bankruptcy judge. According to J&J, LTL has also received royalty revenue streams with a present value of more than $350 million to help cover potential legal costs.
J&J was first reported in July as looking into offloading its talc liabilities and declaring bankruptcy.
The move by the company consolidated the litigation with high stakes over J&J’s talc safety from multiple courtrooms across the country into a single legal proceeding in the court of a federal bankruptcy judge who could force for a settlement to happen between the blue-chip company and plaintiffs.
Previous media reports stated that a J&J attorney told plaintiffs’ lawyers during earlier settlement discussions that the company could pursue the bankruptcy plan, which could result in lower payouts for cases that do not settle before the deadline.
Lawyers representing women with cancer claims asked multiple judges to prevent J&J from executing such a manoeuvre in the weeks leading up to Thursday’s bankruptcy filing, but they were all turned down.
(Adapted from BusinessTimes.com.sg)