Johnson & Johnson is navigating turbulent legal waters, with over 50,000 lawsuits alleging their talc-based products, including baby powder, contain asbestos, potentially leading to cancer. Amidst this storm, the pharmaceutical giant is contemplating its third bankruptcy filing, this time with a strategic move to Texas.
The Move to Texas: A Bid for Bankruptcy
Johnson & Johnson is eyeing relocating its LTL Management unit to Austin, Texas, to address the mounting litigation. This move precedes a potential Chapter 11 filing in the Lone Star State, a decision hinted at through a filing with the Texas secretary of state’s office in December.
Past Struggles and Legal Maneuvers
This isn’t Johnson & Johnson’s first foray into bankruptcy proceedings regarding talc-related lawsuits. The company previously attempted Chapter 11 filings for its LTL subsidiary in New Jersey, aiming for a $9 billion settlement. However, both attempts were unsuccessful, prolonging the legal battle and impacting the company’s stock value.
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The Controversial “Texas Two-Step”
Texas law offers a unique opportunity for companies facing mass tort litigation through what’s known as the “Texas Two-Step,” which allows corporations to transfer liability to a subsidiary, which then files for bankruptcy. While criticized for allowing solvent companies to sidestep accountability, this maneuver presents a strategic option for Johnson & Johnson.
Legal Obstacles and Expert Predictions
Despite its efforts, Johnson & Johnson faces substantial legal hurdles. Previous attempts at bankruptcy filings were rejected by courts in New Jersey, citing insufficient evidence of financial distress. Legal experts remain skeptical about the success of a third bankruptcy case, with some suggesting the chances of it prevailing are slim.
Implications and Criticisms
Critics argue that Johnson & Johnson’s pursuit of bankruptcy protection could delay accountability and justice for affected claimants. Furthermore, the halt in litigation following a Chapter 11 filing may exacerbate the suffering of those impacted by talc-related illnesses.
Continuing Legal Battles and Corporate Response
Amidst the bankruptcy deliberations, Johnson & Johnson faces ongoing jury trials over allegations of knowingly selling talc products linked to cancer. The company maintains its innocence, asserting that its talc-based powders are safe. However, mounting legal challenges and public scrutiny persist.
Shifting Strategies and Market Impact
In response to consumer concerns, Johnson & Johnson withdrew talc-based products from the market in the U.S. and Canada in 2020, replacing them with cornstarch alternatives. This strategic shift reflects the company’s efforts to adapt to changing consumer preferences and legal pressures.
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