Johnson & Johnson has been reported to be planning to shift the liabilities originating from hundreds of litigations related to its Baby Powder onto a newly created business which would then seek bankruptcy protection, said claimed reports quoting information from people familiar with the issue.
Reports quoting sources claimed that information about the plans of bankruptcy by J&J was shared with plaintiffs’ lawyers by one of the healthcare conglomerate’s attorneys during settlement discussions. Bankruptcy protection could result in lower payouts for the litigations that still remain unsettled, said reports.
Analysts said that lawyers of the plaintiffs would not be able to prevent J&J from taking such a step even though they can legally challenge it later.
Sources however also reportedly cautioned that the bankruptcy plan could be dumped by J&J.
Currently there are tens of thousands of litigations being faced by J&J with possible legal actions over allegations that its Baby Powder and other talc products contained asbestos and was responsible for causing cancer among long time people users. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.
“Johnson & Johnson Consumer Inc. has not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate,” the J&J subsidiary housing the company’s talc products said in a statement provided to the media.
No further comments from J&J were available.
According to analysts, those plaintiffs who would not have settled the cases by the time J&J seeks bankruptcy, if it does at all, could face protracted bankruptcy proceedings potentially with a much smaller company than the current form of J&J. The actual payouts to plaintiffs in the future would also depend on the manner in which J&J decides to fund the entity that would be handed over the talc liabilities.
Reports said that Texas's “divisive merger” law is now being considered by J&J which allows a company to get divided into at least two separate entities. If that law is used, J&J will be split into two new entities – one of which would house its talc liabilities and that entity would subsequently file for bankruptcy to stop the litigations, said reports.
Legal experts call this manoeuvre a Texas two-step bankruptcy which is a strategy tha has been used in recent years by other firms facing asbestos litigations.
Reports have also quoted some sources saying that another mechanism could also be explored by J&J to effectuate the bankruptcy filing apart from the using the Texas law.
The asbestos scandal hit J&J in 2018 after media reports exposed that the J&J was aware of the use of asbestos, which is known carcinogen, in its Baby Powder and other cosmetic talc products for years. In May 2020, J&J stopped selling its Baby Powder in the United States and Canada partly because of what it called “misinformation” and “unfounded allegations” about its talc-based product.
(Source:www.reuters.com)
Reports quoting sources claimed that information about the plans of bankruptcy by J&J was shared with plaintiffs’ lawyers by one of the healthcare conglomerate’s attorneys during settlement discussions. Bankruptcy protection could result in lower payouts for the litigations that still remain unsettled, said reports.
Analysts said that lawyers of the plaintiffs would not be able to prevent J&J from taking such a step even though they can legally challenge it later.
Sources however also reportedly cautioned that the bankruptcy plan could be dumped by J&J.
Currently there are tens of thousands of litigations being faced by J&J with possible legal actions over allegations that its Baby Powder and other talc products contained asbestos and was responsible for causing cancer among long time people users. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.
“Johnson & Johnson Consumer Inc. has not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate,” the J&J subsidiary housing the company’s talc products said in a statement provided to the media.
No further comments from J&J were available.
According to analysts, those plaintiffs who would not have settled the cases by the time J&J seeks bankruptcy, if it does at all, could face protracted bankruptcy proceedings potentially with a much smaller company than the current form of J&J. The actual payouts to plaintiffs in the future would also depend on the manner in which J&J decides to fund the entity that would be handed over the talc liabilities.
Reports said that Texas's “divisive merger” law is now being considered by J&J which allows a company to get divided into at least two separate entities. If that law is used, J&J will be split into two new entities – one of which would house its talc liabilities and that entity would subsequently file for bankruptcy to stop the litigations, said reports.
Legal experts call this manoeuvre a Texas two-step bankruptcy which is a strategy tha has been used in recent years by other firms facing asbestos litigations.
Reports have also quoted some sources saying that another mechanism could also be explored by J&J to effectuate the bankruptcy filing apart from the using the Texas law.
The asbestos scandal hit J&J in 2018 after media reports exposed that the J&J was aware of the use of asbestos, which is known carcinogen, in its Baby Powder and other cosmetic talc products for years. In May 2020, J&J stopped selling its Baby Powder in the United States and Canada partly because of what it called “misinformation” and “unfounded allegations” about its talc-based product.
(Source:www.reuters.com)
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