Johnson & Johnson moved Thursday to create a new subsidiary, move all its baby powder litigation into that subsidiary, and file for bankruptcy for the subsidiary. Only the subsidiary is filing for bankruptcy; the parent company has not.
The firm faces thousands of claims from women who say the Johnson & Johnson products have caused ovarian cancer or mesothelioma. In cases that have gone to court, the plaintiffs have prevailed in some and the company in others.
Andy Birchfield, of the Montgomery law firm Beasley Allen, sharply criticized the Johnson & Johnson plan.
“It seems inconceivable that bankruptcy involving a highly profitable $500 billion company could be contemplated, let alone become reality,” says Birchfield of the Beasley Allen law firm, which represents thousands of women and families alleging that use of the company’s Baby Powder led to ovarian cancer. “It seems hypocritical that such a company could defend a product it claims to be safe, while seeking bankruptcy protection for marketing that same product it knew to be dangerous.”
Beasley Allen described the Johnson & Johnson actions this way: “On Thursday, J&J announced that it had created a separate subsidiary, LTL Management LLC (LTL) to ‘hold and manage claims in the cosmetic talc litigation.’ At the same time, J&J placed the subsidiary into bankruptcy, filing in the Western District of North Carolina, Charlotte Division. This venue is considered responsive to companies seeking to shield themselves from legal claims brought about by their defective products.”
Birchfield described it as “another example of the wealthy and powerful using bankruptcy as a hiding place to protect their profits and avoid responsibility.”
Reuters described the Johnson & Johnson action this way: “J&J executed Thursday’s corporate reshuffling through a contentious legal maneuver known as a Texas two-step bankruptcy, a strategy other companies facing asbestos litigation have used.”
Reuters estimates Johnson & Johnson’s worth at more than $400 billion and notes that the company has put talc litigation on hold while dealing with bankruptcy issues.
To date, Reuters says, the company has spent $1 billion defending more than 40,000 cases with settlements and verdicts totaling another $3.5 billion.