talc powder and bottles

J&J’s Bankruptcy Filings for its Asbestos Talc Powder Liabilities are Illegal and Wrong

Why is J&J Being Sued? Asbestos in Johnson’s Baby Powder

To understand why J&J’s attempts to use the bankruptcy system to deal with its asbestos talc liabilities is illegal and wrong, it’s important to first understand the evidence upon which these lawsuits are based. For more than 100 years, J&J marketed its baby powder as safe and pure. Customers trusted the Johnson’s brand when using Johnson’s Baby Powder. The public had no idea that there could ever be asbestos in Johnson’s Baby Powder or that this commonly used product even had to be tested for asbestos.

J&J attacks the motives of lawyers representing victims of asbestos-related cancer caused by Johnson’s Baby Powder. But, it was these lawyers -- including our law firm that filed the first mesothelioma case in 2016 in J&J’s home state of New Jersey – who forced J&J to produce its historical internal documents. These documents revealed that J&J’s talc (used mostly in Johnson’s Baby Powder and in another product called Shower to Shower) contained asbestos and J&J knew it.

These internal documents were ultimately unsealed in open court and made part of explosive investigative reports in December 2018, including the Reuters report entitledJ&J knew for decades that asbestos lurked in its Baby Powder. Among the documents produced by J&J were historical reports from independent laboratories finding asbestos in J&J talc products, including Battelle Laboratories, Mt. Sinai Medical Center in New York, University of Minnesota, Forensic Analytical Laboratory in California, McCrone Laboratories, and the laboratory of J&J’s own consulting expert Dr. Alice Blount. They all found asbestos in J&J's talc and told J&J about it over many decades. Worse than ignoring these red flags, J&J repeatedly and publicly denied that there was asbestos in Johnson’s Baby Powder. CEO Alex Gorsky falsely reassured the public that Johnson’s Baby Powder was safe and never contained asbestos on national television and in a company video widely distributed online.

In October 2019, the FDA confirmed what J&J’s internal documents already showed: Johnson’s Baby Powder contained asbestos. The FDA tested Johnson’s Baby Powder purchased off-the-shelf and detected chrysotile asbestos. Although J&J voluntarily recalled thousands of containers of Johnson’s Baby Powder, which were part of the same batch the FDA tested, J&J continued to sell its iconic talc-based Johnson’s Baby Powder without any warning about asbestos or cancer.

In April 2020, the United States District Court for New Jersey rejected J&J’s challenge to expert scientific testing that identified asbestos in Johnson’s Baby Powder using the high-powered transmission electron microscope. J&J argued the testing was unreliable. The Court disagreed, finding that the scientific method was reliable and supported by the U.S. EPA. Less than 1 month later, on May 19, 2020, J&J finally announced that it would no longer sell talc-based Johnson’s Baby Powder in the U.S. and Canada. J&J easily replaced the talc with asbestos-free corn starch, an option that was always available to J&J.

The FDA’s 2019 findings of asbestos in Johnson’s Baby Powder obliterated J&J’s defense that its talc never contained asbestos. In 2020 and 2021, J&J lost seven straight mesothelioma trials to plaintiffs in three different states (New Jersey, California and Florida). This included the Barden group of cases in New Jersey, in which my partner Moshe Maimon served as co-counsel. Alex Gorsky was subpoenaed to testify in that trial. After the jury heard his testimony, they awarded $750 million including punitive damages.

J&J Orchestrates Two Illegal Bankruptcy Filings

On October 2021, J&J engaged in a scheme to put its talc liabilities into a subsidiary and file for bankruptcy. That subsidiary is called Legacy Talc Liabilities Management, LLC (or “LTL”). By having its LTL subsidiary file for bankruptcy, J&J was able to stop the thousands of lawsuits that were proceeding in the civil jury system. An internal email from J&J’s then Treasurer, Michelle Ryan, dated July 19, 2021, admitted that J&J was attempting to use the bankruptcy system to “cap” its liabilities for the talc baby powder cases.

J&J’s use of the bankruptcy system to stop jury trials guaranteed by the U.S. Constitution is obviously absurd. J&J is one of the wealthiest companies in the world and is one of a few companies with a AAA credit rating which means it is the least likely to ever actually need the bankruptcy system. You do not need to be a lawyer to know that the bankruptcy courts are intended for companies and people that are in actual financial distress. Of course, bankruptcy is not a place for wealthy companies to discharge certain liabilities and avoid dealing with them in courtrooms. Yet, J&J pushed ahead with this bad faith scheme and managed to stop the thousands of talc baby powder lawsuits for 18 months. Then, on January 30, 2023, the United States Court of Appeals for the Third Circuit issued a legal opinion that re-affirmed the well-known law that a company cannot use the bankruptcy courts absent real financial distress. The Third Circuit determined that LTL (the company that J&J formed to put the talc liabilities into bankruptcy) was not in financial distress, and it was not even close.

J&J is valued at approximately a half a trillion dollars and its subsidiary LTL (which J&J put into bankruptcy) had access to over 60 billion. Prior to the bankruptcy, J&J was also fully able to manage its talc liabilities in the jury system. In fact, as revealed in open court, in the 4 years leading up to the bankruptcy, J&J settled nearly 7,000 asbestos talc cancer cases for just under $1 billion dollars. While $1 billion might seem like a lot of money, it is less than J&J pays to its shareholders every month, on average. In other words, J&J is so wealthy that it voluntarily pays its shareholders over $12 billion a year in dividends. This is the last company that would ever be entitled to use the United States Bankruptcy system.

After J&J caused further delay by questioning the Third Circuit’s decision, the bankruptcy court followed that decision and dismissed the bankruptcy at 1:49 pm on April 4, 2023. But, at 4:00pm on the same day, J&J directed its LTL subsidiary to file for bankruptcy again in the same court -just 2 hours and 11 minutes later. Even worse, this time J&J and LTL conspired to try to manufacture financial distress by taking billions of dollars of money away from LTL, the company that J&J claims now has the talc liabilities. J&J also claimed to have the support of thousands of “talc claimants” for its second bankruptcy filing, but it was revealed that no individual talc claimant had signed any agreement in support. J&J’s second bankruptcy filing, which defied the Third Circuit Court of Appeal's dismissal order, has generated even more outrage than the first. The United States Department of Justice, through a division known as the Office of United States Trustee, immediately filed court papers arguing that any further delay of the talc lawsuits would be “unconscionable” and stated, “enough is enough.” Emergency motions to dismiss have now been filed by the U.S. Department of Justice, the Talc Claimants Committee, and law firms representing thousands of other people with cancer claims against J&J arising from the use of Johnson’s Baby Powder. On May 3, 2023, the Third Circuit – whose decision J&J is flouting – ordered LTL (J&J’s subsidiary) to file a response on May 8, 2023, to the Petition for Writ of Mandamus filed with the court to immediately dismiss this second abusive bankruptcy filing.

J&J claims that its baby powder has always been safe and has never contained asbestos. But, there is strong evidence showing this is not true. For example, J&J was required to pay more than $2 billion to more than 20 women who developed ovarian cancer, after a jury found in their favor. J&J was unsuccessful in appealing these cases all the way up to the U.S. Supreme Court. Whether J&J likes it or not, juries get to resolve disputes in our society. J&J, like any other company, can make the business decision to settle any case for fair and adequate compensation instead of going through full trials and appeals. The jury system is not just an idea; it is a constitutional right guaranteed by the 7th Amendment to the U.S. Constitution. When our courts issue decisions, like the Third Circuit did in dismissing J&J’s first talc bankruptcy, those decisions must be abided by and respected. J&J should respect the rule of law and the U.S. Constitution and dismiss its second illegal bankruptcy filing. If J&J does not, we are confident that the system will hold up, and J&J (and its shell company LTL) will again be thrown out of bankruptcy court.

-Jerome Block

Partner, Levy Konigsberg LLP