February 10, 2022. Associate Glenn Chappell, Fellow Leora Friedman, and Associate Allison Parr authored an article for Law360 about Johnson & Johnson’s attempt to “use the bankruptcy system to derail tens of thousands of lawsuits and shield its assets from potentially billions upon billions of dollars in liability arising from claims that its talcum powder causes cancer.”
To manage the lawsuits it has faced because of numerous plaintiffs claiming J&J’s talc products have caused cancer and other illnesses, J&J exploited a Texas corporate law to separate its talc-related liabilities from the majority of its assets. As Mr. Chappell, Ms. Friedman, and Ms. Parr note, “J&J manufactured an insolvent entity solely for the purpose of declaring bankruptcy,” in a questionably legal maneuver dubbed the Texas two-step. The consequences of this corporate “shell game” are dire, the attorneys warn:
If J&J succeeds in pushing the case through the bankruptcy system, the extraordinary tools available to debtors and bankruptcy courts could allow this Fortune 15 company to shift the costs onto gravely ill cancer victims and their families. […]
The consequences of abusing the bankruptcy system to halt litigation and evade liability are devastating. Jury verdicts are a lifeline for victims who use the civil justice system as intended.