Johnson & Johnson Considers Bankruptcy Protections to Offload Liabilities

Johnson & Johnson Baby Powder Mesothelioma

are currently over 30,000 lawsuits in United States courts against Johnson & Johnson brought by plaintiffs who developed ovarian cancer and mesothelioma after using the company’s talc-based products. Johnson & Johnson’s raw talc and talcum powder were found to contain trace amounts of asbestos in several tests conducted between 1971 and 2003. The company’s internal memos and reports reveal that it was aware of this danger for some time and continued to sell its products to consumers The contaminants in Johnson & Johnson’s products have been linked to serious disease and death in tens of thousands of cases. In lawsuits against Johnson & Johnson, plaintiffs have recovered billions of dollars in both compensatory and punitive damages.

Liabilities Mount for Johnson & Johnson

Despite records disclosing that the company had knowledge that its products are linked to mesothelioma and ovarian cancer, Johnson & Johnson has insisted that its talc products are safe for consumer use. Nevertheless, Johnson & Johnson halted sale of its Baby Powder in the U.S. and Canada in May, 2020 due to “unfounded allegations” about its products.

In the past few years, verdicts against Johnson & Johnson have continued to increase. On June 1, 2021, the Supreme Court rejected the company’s request to overturn a $2.1 billion award to 22 female plaintiffs who alleged that use of Johnson & Johnson’s talcum-based products caused them to develop ovarian cancer. Filings with the Securities and Exchange Commission indicate that Johnson & Johnson had already allocated $3.9 billion in 2021 for payments toward future talc litigation.

Johnson & Johnson Considers Subsidiary Bankruptcy

Facing massive losses as a result of these verdicts, Johnson & Johnson has recently indicated that it is considering funneling liabilities into a subsidiary that would file for Chapter 11 bankruptcy. Johnson & Johnson would avail itself of Texas’s “divisive merger” law, which permits a company to divide in to two or more entities. Known as the Texas two-step bankruptcy, this strategy has allowed other companies facing significant litigation risks to file for bankruptcy to block litigation proceedings.

By creating a vehicle to absorb its liabilities, Johnson & Johnson could potentially save billions of dollars after suspending litigation. Plaintiffs with claims against Johnson & Johnson related to talc-based baby products would likely receive reduced compensation for cases that have not settled. Thousands of lawsuits would be condensed and resolved in a bankruptcy proceeding- a lengthy process that could delay resolution of plaintiffs’ claims for years. Purdue Pharma LP, the maker of OxyContin, pursued a similar strategy and is still resolving thousands of opioid lawsuits after two years of bankruptcy proceedings. The plan in Purdue’s case, valued at more than $10 billion, was intended to handle trillions of dollars of claims.

Johnson & Johnson publicly stated that it has not decided whether it will pursue bankruptcy through a subsidiary. Plaintiff’s attorneys have separately filed legal claims to bar Johnson & Johnson from placing its liabilities into bankruptcy.

Congress Investigates Johnson & Johnsons Planned Bankruptcy Subsidiary

In July, a U.S. congressional panel sent a letter to Johnson & Johnson to request all documents related to the company’s proposal to create a subsidiary to seek bankruptcy protection for its talc liabilities. One of the requests made by Congress is to deliver records related to the amount of funding that would be provided to the new entity. The communication from the U.S. House of Representatives Committee on Oversight and Reform’s Subcommittee on Economic and Consumer Policy is seeking to clarify how the company’s plan would impact payouts to potential plaintiffs who were diagnosed mesothelioma and ovarian cancer as a result of using Johnson & Johnson talc products.

The Subcommittee had previously conducted investigations from 2019 to 2020 to determine the risks of asbestos in products containing talc. The inquiry at that time focused on Johnson & Johnson Baby Powder. As a result of the hearings, the Food and Drug Administration Interagency Working Group set new recommendations for the regulation of testing on talc product.

Levy Konigsberg is Ready to Help

Levy Konigsberg (LK) has been at the forefront of litigation against Johnson & Johnson for manufacturing, selling and distributing contaminated baby powder and other talc products that cause mesothelioma and ovarian cancer. Contact our Lawyers today to review whether you or a family member may be entitled to financial compensation. Levy Konigsberg LLP is currently accepting Johnson & Johnson Talc cases in all 50 states.

If you or a loved one has been diagnosed with mesothelioma or ovarian cancer related to the use of Johnson & Johnson’s talc-based products, you may be entitled to a compensation. For a free confidential consultation with lawyers at our law firm, please call 1-800-988-8005 or submit an email inquiry above.

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