Johnson & Johnson’s “Bad Faith” Bankruptcy Attempts to Circumvent Jury Trial in Talc Cases

Lawyers connected to the Johnson & Johnson (J&J) talcum-based baby powder lawsuits are calling the company’s filing for Chapter 11 bankruptcy a “masquerade,” according to Law360. Attorneys are criticizing J&J for its transparent attempt to shield itself from liability claims. The move has several potential consequences for plaintiffs in these lawsuits, including a delay in litigation.

How Did Johnson & Johnson File for Bankruptcy?

Johnson & Johnson is a multi-billion-dollar corporation, prompting many critics to question the validity of the company’s bankruptcy claims.

By taking advantage of a unique Texas law, Johnson & Johnson started the process of filing for Chapter 11. Then, proceeding with a divisional merger, Johnson & Johnson became two new entities: LTL Management, LLC and Johnson & Johnson Consumer, Inc. (JJCI). As a result, Johnson & Johnson split its assets—and liabilities—across the two new companies.

In effect, Johnson & Johnson transferred its liability for talcum powder lawsuits to the new LTL entity. LTL then filed for bankruptcy in a North Carolina court two days later.

How Does Johnson & Johnson’s Bankruptcy Affect Talcum Powder Lawsuit Cases?

Johnson & Johnson’s bankruptcy move could mean several things for those bringing liability claims against the company:

LTL Could Now Be Liable for Talcum Powder Suits

LTL inherited liability during the divisional merger process—and LTL has only $2 billion in trust to pay out potential liability claims, per Johnson & Johnson. Plaintiffs are now bringing a case against a much smaller entity than the original defendant, Johnson & Johnson, which has over $25 billion in cash, per National Public Radio. In turn, this could mean that plaintiffs could be left with smaller settlement payouts.

Compensation Could Be Fulfilled Through LTL’s Bankruptcy Process

Some call Johnson & Johnson’s move a clear attempt to escape the jury trial system and instead pay out liability claims through bankruptcy proceedings. Again, this could allow Johnson & Johnson to settle these cases cheaply.

Lawsuit Proceedings Are Currently Paused

As of November 10, 2021, the federal judge overseeing the bankruptcy case granted a two-month pause on liability litigation as a result of J&J’s Chapter 11 filing.

How have others responded to Johnson & Johnson’s move?

Several parties tied to the lawsuits, as well as government agencies, have criticized the move by Johnson & Johnson, including:

Law firms representing injury victims - Several law firms representing the plaintiffs have called Johnson & Johnson’s bankruptcy an obvious attempt to avoid the jury trial process. They also note that J&J is clearly attempting to delay justice.

The U.S. Senate Judiciary Committee -The committee sent a letter to J&J, calling for fairness and urging the company to give injury victims “their fair day in court.”

Federal bankruptcy Judge Craig Whitley - The federal judge overseeing the bankruptcy case reassigned proceedings from North Carolina (where J&J originally filed) to New Jersey. The reason? J&J has ties to North Carolina courts. The judge is also limiting the current pause on lawsuit proceedings to two months.