Johnson & Johnson Files for Bankruptcy Again (Podcast)

In this podcast, Paul Kelley from Satterley and Kelley explains how Johnson & Johnson has attempted to avoid liability for its cancer-causing products by filing lawsuits to get stays against litigation. The Third Circuit Court has allowed a bankruptcy case from a J&J subsidiary to move forward, but it also declared that there is no longer a stay for lawsuits against Johnson & Johnson.

This means victims can resume their existing lawsuits or bring forward new claims in June 2023.

John Maher: Hi. I’m John Maher. 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. Today, we’re talking about Johnson & Johnson filing for bankruptcy, again. Welcome, Paul.

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

Johnson & Johnson Tried to Escape Liability for Its Cancer-Causing Products by Filing for Bankruptcy

John: Good. Thanks. Paul, we have some recent news on the Johnson & Johnson asbestos lawsuits, but maybe for those people who need to get a little bit caught up, maybe remind us what happened with Johnson & Johnson to get us to this point.

Paul: Sure, and thanks, John. Johnson & Johnson for the last five to seven years has been embroiled in lawsuits all throughout the United States revolving around their Johnson & Johnson Baby Powder and other cosmetic powders that they manufacture historically. There are two cancers that have been alleged and we think have been proven in courts throughout the United States, that exposure to asbestos and talcum powder manufactured by Johnson & Johnson causes ovarian cancer in women and causes mesothelioma in all people.

At one point, in the fall of 2021, it’s my understanding that there were 38,000 cases alleging ovarian cancer had been filed throughout the United States and about 400 lawsuits alleging mesothelioma from exposure to Johnson & Johnson body powders had been filed somewhere in the United States. Without getting into the weeds too much, because we’ve talked about this before, Johnson & Johnson essentially started, formed a subsidiary called LTL Management and sent all of the talc-based liabilities, all these litigation liabilities to LTL, and then LTL essentially declared bankruptcy and bankrupted all those liabilities.

It was a complicated transaction that occurred. Essentially, as a part of the United States Bankruptcy Code, Johnson & Johnson, even though it and its subsidiary, JJCI, that was responsible for the manufacture of baby powder beginning in the ’70s and then moving forward, even though those companies weren’t bankrupt, they were able to take advantage of the stay that gets put in place when a company files for bankruptcy.

From October 2021 until April of this year, all lawsuits against Johnson & Johnson arising out of exposure to baby powder or Shower to Shower or some other body powder, whether it was alleging ovarian cancer or alleging mesothelioma, those cases have been stayed, and so nobody’s been able to take a case to trial, nobody’s been able to proceed.

Eventually, in January of this year, the Third Circuit Court of Appeals reversed the bankruptcy court which denied a motion to dismiss Johnson & Johnson, LTL’s bankruptcy and determined that the bankruptcy should have been dismissed. The basis for that determination was that neither LTL nor its parent company, Johnson & Johnson, are in financial distress. That is the single most important factor. Whether it’s a corporate bankruptcy or an individual bankruptcy, is the debtor, J&J, LTL, are they under financial distress that it could not operate its company without the protection of the United States Bankruptcy Laws?

In January, the Third Circuit said the bankruptcy needs to be dismissed, but there’s always things that happen, and that’s really what we’re here to talk about today is what’s happened since that point.

The Third Circuit Court Issued a Mandate to Dismiss Johnson & Johnson’s Bankruptcy Case

John: Okay. Yeah, so why don’t you give us that news then? I know that something just happened just last week in terms of the case. What recently happened?

Paul: Following Johnson & Johnson or, excuse me, following the Third Circuit’s decision, the bankruptcy should have been dismissed. Johnson & Johnson and LTL still had some rights in the Third Circuit, and they filed something called a petition for rehearing en banc.

Typically speaking, when an appellate court in the federal system hears an appeal from a lower court, three judges listen to that appeal, and it takes a majority, two to one, in order for a decision to be rendered. That’s what happened in January.

Following that, Johnson & Johnson and LTL sought rehearing en banc. What that means is every judge that’s in the Third Circuit Court of Appeals, and I’m not sure how many there are, but there’s probably 15 to 20, that they are asked to also decide whether Johnson & Johnson and LTL’s bankruptcy should move forward or whether it should be dismissed.

Very rarely are petitions for rehearing en banc granted. In fact, this petition for rehearing en banc was not granted. It was denied in March, late March.

On April, I think it was April the 7th, the Third Circuit issued what’s called a mandate, and the mandate essentially is a direction to the lower court, which in this case was the Bankruptcy Court for the District of Delaware, “You have to dismiss the case. All appellate rights have been exhausted. You have to dismiss the case,” which now effectively means Johnson & Johnson, JJCI are back in the tort system, and people who have been injured as a result of their product can start to litigate their cases again. They can take them to trial. They can get discovery and engage in the full gauntlet of activities it takes to get a case to trial.

Johnson & Johnson Filed for Bankruptcy Again So the Courts Would Issue a Stay for Lawsuits Against the Company

Well, that was probably 9:30, 10:00 in the morning, and by 3:00 that afternoon, LTL filed another bankruptcy petition and sought another stay of all the lawsuits all throughout the United States. It was highly unusual. To be frank, we expected that the first bankruptcy would not be the end of this conflict. We expected that, down the road, LTL, Johnson & Johnson related entities would perhaps refile again, but I didn’t expect it to occur the very day that the Third Circuit laid down its mandate. For about three hours, we were all pretty excited about the prospect of being able to seek relief for our clients and, later that afternoon, it was taken away.

Now, shortly thereafter, the New Jersey Bankruptcy Court issued a temporary restraining order. What that means is that for a period of time until the court could schedule some additional proceedings and hear some additional argument that, again, all cases against J&J from East Coast to West Coast were again stayed, no trials are going to occur, no discovery can take place. I mean, nothing can happen as it relates to Johnson & Johnson.

However, that particular stay was only going to be in place for as long as it took for the bankruptcy court to hear additional argument as to whether that stay should persist for longer than a week or two or a couple of months, so on April 11th and then again on April 18th, the court held some pretty significant proceedings, took witnesses from Johnson & Johnson, allowed the creditors’ committee, which essentially is the people that represent the victims of J&J’s products, to cross-examine these witnesses to get to the core of the issue, which is is Johnson & Johnson, is LTL, is any other subsidiary that’s been formed to try to eliminate this liability, are they under financial distress? That’s ultimately what the bankruptcy court has to decide.

Bankruptcy Court Stays Litigation Against LTL, but Allows Litigation Against J&J to Move Forward

The good news is, last Thursday, April 20th, the bankruptcy judge in New Jersey did not dismiss the bankruptcy, the second bankruptcy. It’s still going. The bankruptcy judge continued the stay of all litigation related to LTL, the actual bankrupt debtor. However, the court for the most part lifted the stay as it relates to Johnson & Johnson, JJCI, and other companies that sold J&J products. What that means is is that, effective that day, effective April 20th, Johnson & Johnson is back in the tort system. It doesn’t get the benefit of the automatic stay right now and has to participate in cases.

Now, the court did give one caveat. No trials can occur against Johnson & Johnson any earlier than June 15th of 2023, so less than a couple of months from now. The court really did not give a reason as to why trials couldn’t proceed at that point. I suspect, because there are so many cases out there, that the court wanted to give the courts overseeing those cases some time to get things back in action in those courts, but the court, New Jersey Bankruptcy Court, made it very, very clear, John, that starting that day, J&J now has to start participating in these lawsuits again. Come June 15th, it will be trying cases all throughout the country again just like it did prior to the October 2021 bankruptcy.

The Third Circuit Concluded That the Lawsuit Was Filed in Bad Faith

John: Okay. Now, will you be going after J&J, the parent company, now and not LTL, this other company that J&J set up in order to take over the liability for these cases?

Paul: Absolutely. First of all, the court said that we can’t really proceed against LTL right now, which is the debtor. Our position has always been all along Johnson & Johnson and JJCI are the responsible parties for manufacturing this product and for causing people’s injury.

Now, while the bankruptcy court didn’t necessarily say that there was fraud perpetrated on the court, the Third Circuit didn’t say that, they did conclude or the Third Circuit concluded that this was a bad faith bankruptcy. Because Johnson & Johnson and LTL are not in financial distress, they shouldn’t get the benefit of this bankruptcy.

Right now, we are able to proceed against the parties that we’ve always felt were responsible for causing our clients’ injuries. LTL, its responsibility is just contractual because Johnson & Johnson gave it the liabilities. LTL didn’t exist at any point in time that Johnson & Johnson even manufactured body powders that contain asbestos. There are reasons why we want LTL to ultimately be… for its bankruptcy to be dismissed. There are reasons why we want the injunction to be lifted as it relates to LTL, but we don’t need LTL to continue doing what we’ve been doing for the last seven or eight years, which is trying to hold Johnson & Johnson and JJCI responsible for causing people these terrible cancers.

If You Developed Cancer From J&J Products, You Can File a Lawsuit Starting in June 2023

John: Right. What does this mean for people now who have lawsuits that are currently filed against J&J or for new lawsuits that may come up in the near future?

Paul: Sure. It’s critically important for people with new lawsuits because they haven’t been able to file, even file a lawsuit since October of 2021. As soon as the bankruptcy was filed, all such activity was stayed.

John: Anybody who got sick just in the last couple of years, they haven’t been able to do anything to move forward with a lawsuit, but now they can?

Paul: Absolutely right. I mean, they could sue anybody else that they thought might have been responsible, but they could not sue Johnson & Johnson, and obviously you couldn’t even get a trial date if you can’t file a suit. The good news is, no matter when that diagnosis occurred, they can file their lawsuit now against Johnson & Johnson and JJCI just as they could a year and a half ago. That’s good news for new cases or new potential lawsuits.

For people that had lawsuits pending against Johnson & Johnson at the time of the original bankruptcy, it’s all over the board as to what’s going to happen in the immediate future. For example, I have a case that’s scheduled for trial in September,  and we’ve had other defendants that are involved in that case, and we’ve been litigating it for the entire time while J&J has been in bankruptcy, and we have a trial date. Our intention is to try the case against all of them, including Johnson & Johnson, in September when the court scheduled the case.

Some courts may not allow that to occur. Some courts have stayed cases against everybody, even parties that are not within the Johnson & Johnson umbrella, because they wanted to see how the bankruptcy turned out. Some cases are ready to be tried today. It really just depends on what jurisdiction you’re in, what stage of litigation the case is in at this point, but my suspicion is is that lawyers representing victims across the country are going to be pushing hard to get their case to trial because the problem, of course, is the devastating impact of these cancers, in particular mesothelioma, is that the victims aren’t going to live two, three, four years.

They need to get those cases to trial as soon as possible so they can participate in their cases. I anticipate that the plaintiff’s lawyers all over the country will be very aggressive in trying to get these cases to trial for sure.

 Contact Satterley and Kelley for Help

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

Paul: Thanks, John. I appreciate it.

John: For more information about mesothelioma and asbestos exposure, you can visit the law firm of Satterley & Kelley at satterleylaw.com or call 855-385-9532.