The U.S. Trustee Program, a branch of the Department of Justice (DOJ), has filed a motion in a Houston federal bankruptcy court to dismiss a Chapter 11 filing by a Johnson & Johnson subsidiary. This filing aims to resolve over 60,000 lawsuits related to the company’s talc products. This marks Johnson & Johnson’s third attempt to utilize this strategy in as many years.
In September, Johnson & Johnson reportedly raised its settlement offer by $1 billion, bringing the total to approximately $9 billion, to address claims that its talc baby powder caused gynecological cancer. However, the DOJ contends that Johnson & Johnson’s latest bankruptcy maneuver is a disingenuous attempt to shield itself from billions in personal injury claims without actually entering bankruptcy.
The company’s strategy involves creating a new subsidiary, transferring billions in liabilities while retaining minimal assets within this entity, and then filing for bankruptcy on its behalf. This move is seen as a way for Johnson & Johnson to secure a third-party release, which would discharge both itself and the subsidiary from liability. This tactic is explicitly prohibited by a recent Supreme Court ruling.
Johnson & Johnson has employed similar tactics in the past, both of which were dismissed due to findings of bad faith. Despite these setbacks, the company has filed this new case under a different entity and jurisdiction, which the DOJ believes is an attempt to circumvent prior rulings.
The trustee’s motion asserts that the debtor in question lacks a valid reason for bankruptcy protection and that the filing serves no legitimate restructuring purpose.
The ongoing litigation stems from numerous claims alleging that Johnson & Johnson’s talc-based products, including baby powder, caused personal injuries. Many lawsuits claim a link between talc exposure and ovarian cancer, while others allege that the products were contaminated with asbestos, leading to mesothelioma. J&J has consistently denied these allegations.
As of October 2021, approximately 36,000 ovarian cancer claims and 470 mesothelioma cases were linked to Johnson & Johnson’s talc products, with many cases consolidated in a multi-district litigation in New Jersey.
JNJ stock closed at $163.45 on Tuesday, down 0.38%.
