Johnson & Johnson Bankruptcy and Asbestos Cases (Podcast)

Paul Kelley explains how asbestos got into Johnson & Johnson talc powder. Then, he outlines what the company has done to try to avoid liability, and he tells people what to do if they’ve been affected.

John Maher: Hi, I’m John Maher and I’m here today with Paul Kelley. Paul is a partner with the Kentucky personal injury law firm Satterley & Kelley which has over 30 years of collective experience in handling cases involving mesothelioma and asbestos exposure. Welcome, Paul.

Paul Kelley: Hi, John. How are you doing this morning?

Has Johnson and Johnson Manufactured Products That Contain Asbestos?

John: Good, thanks. So, Paul, today we’re talking about the Johnson & Johnson bankruptcy and asbestos cases. Has Johnson & Johnson manufactured products that contain asbestos?

Paul: Absolutely John. We’ve been kind of at the ground floor of litigation involving Johnson & Johnson talcum powder products, and what we’ve discovered for the last 10 years of litigating these cases is that J&J has historically manufactured body powders. Probably the one that everybody’s most familiar with is Johnson’s baby powder that contained asbestos.

J&J also manufactured another popular body powder called Shower to Shower that contained asbestos as well for many, many decades. Most recently, within the last year or two, J&J originally pulled talcum powder off the shelves, the baby powders and any other products that they manufactured in the United States. Then even more recently, they’ve taken those products off the shelves worldwide.

So no longer can anyone purchase powders that were made with talc anymore in 2023. But what we’ve learned from handling these cases for the last 10 years or so, is that the talc that was put into, used to manufacture J&J’s baby powder and Shower to Shower, that it’s a mined product and it’s been mined in places like Vermont. It’s been mined in China, there’s been some Italian talc mines that have produced some talc.

Talc is a naturally occurring product, and asbestos is a naturally occurring product. It’s been demonstrated time and time again through the medical and scientific literature, the geologic literature that talc and asbestos form in the same places. So when they mine the talc, they also mine asbestos as a part of the talc. Then they take that talc product, they send it over to the process center, and they mill the talc and refine it, and then mix it with other products. Then you have your product, your baby powder or your Shower to Shower.

But unfortunately through part of the collection process, as part of the milling process, there’s no way to eliminate the asbestos. The asbestos is there and it’s in the final product and has been in the final product probably for as long as it’s been produced. But we’ve seen internal documents from Johnson & Johnson indicating that testing labs back in the fifties and sixties were seeing asbestos in the Johnson’s Baby Powder, or the talc that was used to make the Johnson’s Baby Powder.

Then moving into the sixties, and seventies and certainly moving forward into the modern era that talcum powder has routinely tested positive for asbestos containing products. Whether it be chrysotile, which is a serpentine form of asbestos, or whether it’s anthophyllite or tremolite, which is an amphibole form of asbestos.

Now, J&J doesn’t agree with this, or at least they don’t publicly agree with this. You won’t see any J&J people in the news agreeing that they supplied a product of asbestos, and you certainly won’t get anyone from J&J to agree in a court case that their products contain asbestos. But the evidence is overwhelming that J&J’s baby powder and Shower to Shower contain asbestos and has contained it at least since the 1950s and probably before, but the testing really began at that period of time.

Diseases Caused by Asbestos in J&J Talcum Products

John: So what diseases have been caused by the asbestos that’s in J&J talcum powder products?

Paul: Sure. So the most commonly associated diseases that have been proven, again, I think by the medical and scientific literature is ovarian cancer. Thousands of women have been diagnosed with ovarian cancer over the last 40, 50 years. Unfortunately, because it was not widespread knowledge that J&J’s products contain asbestos, women and all people continued to use it for forever.

More recently, in the last 20 or 30 years, the medical and scientific literature has made a causal connection between ovarian cancer and exposure to talcum powders. So that’s one.

Then the other one is mesothelioma, which is most commonly associated with asbestos exposure. Asbestos is the only known cause of mesothelioma, and we have handled cases for numerous people who have been diagnosed with mesothelioma and the only exposure they had, or one of the exposures they had to asbestos was a lifelong exposure to Johnson’s Baby Powder, or maybe their mother or father used Johnson’s Baby Powder on them when they were a baby and a child. Then decades later, they develop mesothelioma, which again is a cancer that is universally accepted to be caused by asbestos exposure.

Lawsuits About Asbestos in Johnsons & Johnsons Baby Powder

John: Okay. Have there been any lawsuits or jury trials regarding asbestos and Johnson & Johnson talcum powder products?

Paul: There are thousands of lawsuits that are currently pending against Johnson & Johnson associated with asbestos exposure from baby powder, Shower to Shower, and any other talcum powder products that they’ve made. There have been, to my knowledge, approximately 50 cases that have gone to trial, probably roughly half-and-half between ovarian cancer cases and mesothelioma cases.

There have been numerous jury verdicts in favor of plaintiffs in those cases. Those jury verdicts have totaled in the billions of dollars when it’s all added up. There of course have been a few defense verdicts as well, but there are thousands of lawsuits that are pending.

I believe the latest statistics are somewhere in the upwards of 38,000 ovarian cancer cases that are currently pending somewhere in the United States, and I believe about 350 mesothelioma cases. You may ask, well, why is there a disparity between the ovarian cancer matters and the mesothelioma cases?

It’s because mesothelioma is so very rare. It is a disease that’s diagnosed in approximately 3,000 people per year in the United States. Fortunately, there’s far less people afflicted with mesothelioma and of course, both diseases are fatal. Mesothelioma is universally fatal. I mean, everybody who gets that disease will unfortunately probably die within 18 to 24 months.

Ovarian cancer can have a much better outcome. Of course, it can be fatal as well, and frequently is fatal. But if it’s caught early, there’s a lot of treatments that can be provided and ovarian cancer is just typically a more common disease process. But essentially between these two disease processes, there’s at least 40,000 cases that are currently pending against Johnson & Johnson from various women who have developed ovarian cancer and men and women who developed mesothelioma from using the product.

Johnson & Johnson’s Convoluted Bankruptcy Filing to Avoid Paying Liability Claims

John: Now we understand that Johnson & Johnson is going bankrupt or has filed for bankruptcy. Did Johnson & Johnson go bankrupt because of these lawsuits?

Paul: Well, therein lies the rub John. Johnson & Johnson did not go bankrupt. Johnson & Johnson is a Fortune 50 or Fortune 100 company, is flush with cash and is worth hundreds of billions, if not into the trillions of dollars.

What Johnson & Johnson did in order to try to avoid all of these lawsuits and try to A) avoid having to pay fair value to each and every claimant and B) to try to expediently resolve the cases, it went into Texas and employed a procedural device called the Texas two step, or also known as a divisive merger. Essentially, and it’s more complicated than this, but I’ll try to keep it as simple as possible. It formed two other companies, and one company was intended to dump all the liabilities, and specifically the talc liabilities into this company. Then the other company got all the assets, got the product line, got everything that J&J and its subsidiaries did, and business would continue as usual, and they would never miss a beat.

The company that got all the liabilities was destined for bankruptcy. That was the plan all along. So J&J did this with its subsidiary and it created these two companies, and then the company destined for bankruptcy was immediately moved and was headquartered in North Carolina. Then I believe two, maybe three days after the creation of the company and the transition to North Carolina, it declared bankruptcy.

As a result of that, and there was some legal maneuvering that had to happen in order to get to that point, but the bankruptcy was eventually moved from North Carolina to New Jersey because J&J is headquartered in New Jersey. J&J’s subsidiary was also headquartered in New Jersey.

So the bankruptcy court in North Carolina decided New Jersey’s the place for this bankruptcy. But as a part of that process, J&J, even though it was not the bankrupt entity, was granted a stay of all legal proceedings against it from people alleging that they suffered some disease caused by exposure to its talc. So what that meant is all those lawsuits, all those 38 some thousand lawsuits came to a grinding halt. This happened I believe in October or November of 2021.

So if a case was filed before that, it couldn’t move. It didn’t matter where it was. It could be in state court, it could be in federal court, could be Vermont to Washington, didn’t matter. The plan was going to be that J&J would fund this new company so much money. I believe the original process or the original suggestion was about $2 billion.

Could have been more, really doesn’t matter, wouldn’t have been enough to compensate all those folks. But basically try to resolve all those claims in the bankruptcy system. It didn’t matter that J&J wasn’t bankrupt, it didn’t matter that its subsidiary barely existed long enough to develop any other liabilities or do anything. It was going to declare bankruptcy and the plan was to avoid all these lawsuits and to avoid future lawsuits. So that’s a part of this procedure.

Numerous asbestos manufacturers over the years have gone into bankruptcy. It’s been a little controversial in some regards because some of those companies were allowed to continue their business. But unlike J&J, it was absolutely determined in 99% of the cases with previous manufacturers that have gone into bankruptcy that they were suffering from financial distress. That the lawsuits that had been filed against them were overwhelming. I mean, these were companies that only made asbestos products or substantially made asbestos products, and they could not have continued their business for too much longer and continue to pay victims had they not been granted some sort of protection from the bankruptcy code.

J&J wasn’t in that same situation. I mean, J&J manufactures a wide variety of products. Baby powder is one of their flagship products, but in terms of profitability, there’s a lot of other things that J&J does aside from talc that precluded it from going bankrupt. Further, J&J, they did it this way so that J&J did not have to suffer the consequences of declaring bankruptcy.

Once a company does that, then there’s a period of time that the company loses control over their business. May be a matter of months, may be a matter of years, but there’s something called a bankruptcy trustee whose job is to identify what the assets are and identify what the debts are, to collect those assets and to distribute funds or to figure out a 524 plan how claimants can be paid.

So you lose a lot of control over your business. So that’s why J&J created this separate entity. So the separate entity would go through all that and J&J could just plug along business as usual.

John: What was this subsidiary of Johnson & Johnson called?

Paul: It’s called LTL. LTL Management, I think, or LTL LLC. It is relatively meaningless. It doesn’t do anything. It just holds those liabilities.

Current State of the Johnson & Johnson or “LTL” Bankruptcy

John: Right. So what’s the current status of this LTL bankruptcy?

Paul: Well, right now we have some great news. About two weeks ago, the third Circuit Court of Appeals… Well, let me backup. The bankruptcy court, a group of creditors, and that’s what the asbestos claimants are, they’re just creditors. They had asked the bankruptcy court to dismiss the bankruptcy or to lift the stay as to J&J. The impact for that would be that J&J would be back in the court system, people could continue to litigate their cases on an individual basis in whatever court they filed their case in.

The bankruptcy judge in New Jersey decided not to do that, denied the plaintiff’s motion. He said that he thought that the bankruptcy court was the place to be and that claimants would get a much more expedient resolution if cases were resolved through that system because over the years, only 50 cases have been tried and that it would take decades to try just the current inventory.

Of course, we disagreed with that considerably and there’s a process that allowed us to go straight to… Or allowed the claimants to go straight to the Third Circuit Court of appeals to appeal that denial of the motion. About two weeks ago, the Third Circuit Court of Appeals decided, issued a decision, and said that that bankruptcy should be dismissed. I won’t get into all the details, but essentially it concluded that the new company was not in financial distress and in part the new company was not in financial distress because its parent company J&J was not in financial distress.

J&J had agreed to provide funding to the new company, quite frankly and well into the future that would make it very unlikely anytime soon that that company would be in financial distress under the current circumstances.

So ultimately all of these cases will be returned to the court system and people will be able to litigate their cases on an individual basis as has been done in the past. There’s still some appellate procedure that’s in place. Last week, Johnson & Johnson moved for what’s called rehearing en banc, and that means that ordinarily an appeal is decided by three appellate judges and you have got to get two out of three in order to win.

I believe that this decision was decided three zero by that panel, but an aggrieved party by a panel’s decision can ask the entire group of appellate judges in that circuit, which would be the Third circuit Court of Appeals to grant a rehearing and essentially try to decide the issue differently than what the original panel did.

Hearing en banc is rare. When one’s granted, it’s typically not granted and quite frankly, we have very little expectation that it’ll be granted in this case, but it certainly could be. If it were, then that would give LTL and J&J some life on this bankruptcy, the procedure that they have employed.

But the likely scenario is it gets denied. At that point then they have to petition for a writ of certiorari with the United States Supreme Court. The United States Supreme Court takes a very small percentage of cases that it’s asked to take. I make no prediction as to what the Supreme Court would do with this, except the odds are not in anybody’s favor when they file a petition of the Supreme Court because it just can’t take all the cases that are filed.

So our expectation and our hope is that by spring early summer of this year, all of these cases will be back where they belong and people who have filed claims and have a grievance with Johnson & Johnson will be able to have their day in court. That’s what our tort system, that’s what the Seventh Amendment of the Constitution of the United States, as well as most states allows and we’re looking forward to the opportunity to be able to continue this fight against Johnson & Johnson and all the other companies at fault for causing people’s disease from exposure to these products.

Contact Satterley and Kelley to Learn More

John: All right. Well that’s really great news and great information, Paul. Thanks again for speaking with me today.

Paul: Thanks, John.

John: For more information about mesothelioma and asbestos exposure, visit the Law Firm of Satterley & Kelley at Satterleylaw.com or call 855-385-9532.