Talc Plaintiffs’ Attys Fume At Idea J&J Might Use Ch. 11 Tactic

Attorneys representing talc injury plaintiffs in some of the thousands of lawsuits related to exposure to Johnson & Johnson products said that the company’s purported plan to consider siloing its talc liabilities with a subsidiary and then moving it into bankruptcy is shameful and should be barred by law.

In a statement from the law firm Beasley Allen, the firm and its lawyers said that media reports of Johnson & Johnson’s alleged bankruptcy plans to contemplate a corporate division would serve to protect the company’s assets at the expense of personal injury claimants who have suffered as a result of using the company’s asbestos-tainted talc products that include its baby powder.

Dubbed the “Texas Two-Step,” the strategy has been deployed before by companies facing mass tort liability using the divisive merger laws available in Texas. The divisive merger strategy allows a company to shield its assets while putting up a ring-fence around its liabilities, having the effect of channeling tort claims into a centralized forum: the bankruptcy court. There, Section 524(g) of the federal Bankruptcy Code allows for the handling of these mass torts — both current and future — in a comprehensive way. Frequently, the bankruptcy court will allow for the appointment of a committee of existing tort claims, as well as a representative for future, unknown claims that are common in asbestos liability cases.

The impact of the bankruptcy and the centralizing of tort claims, when coupled with a divisive merger strategy, is to limit the parent company’s exposure and the source of potential recovery for the claimants.

Tens of thousands of injury claims have been leveled against Johnson & Johnson and its long-time supplier Imerys Talc America in recent years. Those claims arise from diagnoses of mesothelioma and ovarian cancer that were allegedly caused by long-term exposure to talc products containing asbestos.

Imerys Talc and two affiliates filed for Chapter 11 protection in February 2019 under the financial strain of defending against the talc injury suits. It sold the bulk of its assets, including its mining operations, earlier this year in a $223 million transaction with Magris Resources Canada Inc.

The former talc miner’s proposed Chapter 11 plan calls for the creation of a trust, to which all tort claims against it would be channeled and from which claimants could receive a recovery.

Johnson & Johnson itself has been subject to several large judgments related to talc injuries — including a $4.69 billion verdict against the company in Missouri, which was later reduced on appeal to about $2.1 billion. That case, which involved 22 claimants, attributed some of the award to subsidiary Johnson & Johnson Consumer Inc., saying out-of-state plaintiffs in the suit could only recover from that entity.

Law360: https://www.law360.com/articles/1404483/talc-plaintiffs-attys-fume-at-idea-j-j-might-use-ch-11-tactic

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