A contentious fight has erupted between Johnson & Johnson and a news agency that questioned the consumer health care giant’s tactics to sidestep tens of thousands of lawsuits alleging its baby powder causes cancer.
On Friday, Reuters reported reviewing internal documents that revealed J&J’s scheme to shuffle all its talcum powder lawsuits out of trial courts and into bankruptcy. This dramatically limits the amount of compensation victims can receive and extinguishes victims’ right to a trial by jury. The day before the article was set to run, J&J lawyers sought a temporary restraining order against Reuters to block the agency from publishing the story. Reuters refused to back down.
The issue traces back to a controversial move that the $400 billion consumer healthcare giant made last year to limit its liability in the talcum powder litigation. Bogged down by about 38,000 talcum powder lawsuits, the New Jersey-based powerhouse used a Texas corporate law to execute a divisive merger and then bankrupted the newly formed company, a corporate maneuver known colloquially as the Texas two-step.
Johnson & Johnson Bankruptcy Plan: Texas Two-Step Deal
Step 1: J&J created a new entity in Texas that ultimately became known as LTL Management LLC. Then J&J shuffled all its talcum powder lawsuits into the subsidiary along with a limited pool of money to be used to pay off victims.
Step 2: LTL Management was moved to North Carolina and then declared bankruptcy, stopping all talc litigation in its tracks as LTL Management works through bankruptcy proceedings.
The Texas law explicitly states that creditors cannot go after other assets. That means J&J’s victims cannot have access to any of the parent company’s other holdings beyond what few assets have been funneled into LTL Management.
Johnson & Johnson has put about $2.5 billion into LTL Management to cover payouts to victims. But to date, the company has been saddled with about $3.5 billion in verdicts and settlements from just a small handful of lawsuits.
According to Reuters’ report Friday, J&J covertly carried out its Texas two-step scheme earlier last year by assembling a team of staffers to work in the strictest of confidence. They called the plan “Project Plato.” Reuters reviewed an internal memo written by J&J attorney Chris Andrew that cautioned J&J: “It is critical that any activities related to Project Plato, including the mere fact the project exists, be kept in strict confidence.”
Reuters sought a response from Johnson & Johnson. The company responded with a statement defending its move to resolve the talcum powder lawsuits, then sought to block Reuters’ article.
“We reject the factually-unfounded and legally-meritless claims made by J&J’s lawyers and will continue to report without fear or favor on matters of public interest,” a Reuters spokesperson said in a statement.
“Johnson & Johnson is abusing the bankruptcy system for the sole purpose of avoiding accountability for their wrongful conduct by denying people their day in court,” said Beasley Allen’s Leigh O’Dell, who serves as co-lead counsel of the plaintiff’s steering committee in the federal multidistrict litigation in New Jersey involving cases of ovarian cancer linked to J&J’s talcum powder. “Meanwhile, people are suffering and dying from devastating cancers all because Johnson & Johnson put profits over consumer safety.”
Talcum Powder Lawsuits
For more than a century, Johnson & Johnson has promoted Johnson’s Baby Powder as safe for even babies and encouraged women to use talcum powder on their genitals for personal hygiene. Yet internal documents show that the company knew for decades that the talc it used in its products could contain asbestos, a known carcinogen, and other impurities that could be harmful to consumers. Recent studies have linked genital use of talcum powder to an increased risk of ovarian cancer. Johnson & Johnson ultimate pulled its baby powder from the U.S. and Canada markets. Now the consumer healthcare giant is facing thousands of talcum powder lawsuits.
Beasley Allen Law Firm has the resources to stand up to Corporate America and represent clients throughout the country while never losing sight of the individual. If you or a loved one used talcum powder for feminine hygiene and developed ovarian cancer, we can help.
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Sources:
https://www.reuters.com/business/healthcare-pharmaceuticals/inside-jjs-secret-plan-cap-litigation-payouts-cancer-victims-2022-02-04/
https://www.npr.org/2022/01/07/1071181199/johnson-johnson-tests-a-legal-maneuver-known-as-the-texas-two-step
