Second Talc Bankruptcy Case Involving Johnson & Johnson Thrown Out

The courts have once again denied Johnson & Johnson and its subsidiaries from filing bankruptcy. This allows people to move forward with litigation if they have developed ovarian cancer or mesothelioma due to exposure to asbestos in the company’s talcum powder.

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 the second talc bankruptcy case involving Johnson & Johnson being thrown out. Welcome, Paul.

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

NJ Court Denies J&J Subsidiary From Filing Bankruptcy

John: Good, thanks. So, Paul, tell me a little bit more about what happened in the most recent bankruptcy case involving Johnson & Johnson and their LTL Management LLC subsidiary.

Paul: Sure, John, I’ll cut to the punchline. Last Friday, the bankruptcy court in New Jersey dismissed the LTL bankruptcy and so, effective that day, it’s over. LTL, Johnson & Johnson, and any related entities are all outside of the bankruptcy system and they’re back in the tort system.

John: Okay, so give us a little bit of background. I know we’ve talked about this before, but for people who might not have heard about it, what is the Texas two-step and what was Johnson & Johnson trying to do with this bankruptcy claim?

Ovarian Cancer Caused by Asbestos in Talcum Powder

Paul: Sure. So, what happened was, probably a little bit less than 10 years ago it became more widely known that Johnson & Johnson Baby Powder and other talcum powder products contain trace levels of asbestos. And lawyers, such as myself, started filing lawsuits. And as it turned out, the science has demonstrated that asbestos causes, of course mesothelioma, which is uniquely associated with asbestos exposure, and it also causes ovarian cancer.

And a lot of women have suffered from ovarian cancer historically, and until fairly recently, it was not known at all that ovarian cancer could be caused by talcum powder exposure and really the asbestos in the talcum powder. So, Johnson & Johnson was inundated with lawsuits when this became more commonly known. In the United States, mesothelioma is very rare, and so there’s probably only about 3000 cases of mesothelioma diagnosed every year. Ovarian cancer is far more common, and there’s thousands of ovarian cancer cases that are diagnosed each year as well.

And so, a lot of lawsuits were filed, and I think the current number actually may be closer to 60,000, that are currently pending against Johnson & Johnson in various corners of the United States, prominently in New Jersey, which is where J&J is located. But there’s pockets of cases all over. And so, after a series of trials…and I think there’s been 23 trials that have occurred over the last six, seven years, and to be fair, J&J has won several of those trials, but they’ve lost a significant portion.

And some of those verdicts have been exceeding billions of dollars. And Johnson & Johnson’s paying tens of millions of dollars per case to defend them to their lawyers, experts. It’s a lot, and obviously I’m not privy to those exact figures, but I’ve been around the block enough to know that they’re spending a lot of money.

We tried one, four or five years ago, and there were a dozen lawyers in the room for Johnson & Johnson, big law firms, big national firms. These lawyers are billing five hundred to a thousand dollars an hour, their experts are charging $50,000 a case, and they’ve got six or seven of them. So, they’re spending a lot of money. So rather than trying to allocate the cost of litigation to fairly resolving the cases, J&J devised another plan. And that plan was to create a subsidiary. And it was through this Texas law.

J&J Created a Subsidiary to Carry Its Litigation Liabilities

It’s got a variety of names. I think they call it the divisive merger, and some folks call it the Texas two-step. But essentially what it entails is you take an existing company, you spin it off into two different entities, and entity number one is going to carry on the business of the company as if nothing ever stopped.

Entity number two gets the liabilities. And in this particular case, it was very specific liabilities. It was just the talc litigation liabilities. So, they didn’t dump in their other products that they’ve been litigating. They didn’t dump in accounts receivable and accounts payable, liabilities, mortgage, stuff like that. It was just talc liabilities. And so, one of the companies they formed was called LTL Management LLC. LTL Management LLC is the company that got the talc liabilities.

The Subsidiary (LTL Management) Filed for Bankruptcy

Very shortly after they formed that company, it went into bankruptcy. And it was formed in North Carolina, which has absolutely nothing to do with Johnson & Johnson. Johnson & Johnson have been based out of New York or New Jersey for years. Everything that has to do with this talc has been in New Jersey. So, they filed this bankruptcy in North Carolina and the North Carolina bankruptcy court. And by the way, John, the reason why they filed it there is because they thought they had a favorable judge that would go along with this plan.

That judge ultimately determined that North Carolina had no connection to this bankruptcy. It was an inappropriate jurisdiction and, actually, on its own, pretty much transferred the case to the bankruptcy court in New Jersey, and that’s where the first LTL / Johnson & Johnson bankruptcy was handled. So, one question that our listeners may have is, well, who cares if LTL declares bankruptcy?

Johnson & Johnson’s still an ongoing entity. So, what they did was they went to the New Jersey bankruptcy court and said, we deserve the protection that LTL gets from lawsuits because we basically are on the hook for LTL’s liabilities.

Filing Bankruptcy Halted All Litigation Against J&J

Once a bankruptcy is filed by a debtor, LTL in this case, there’s what’s called an automatic stay that gets put into place. So, all these cases, all these thousands of lawsuits that have been filed all over the country, they came to a screeching halt and Johnson & Johnson was able to convince the bankruptcy court back in 2021 to stop not just lawsuits against LTL, but lawsuits against Johnson & Johnson. No trials, no discovery, nobody could settle outside that system. It just came to a screeching halt.

And if there were other defendants that were pursued in cases involving Johnson & Johnson, in some instances, some of those cases came to a halt as well because the courts didn’t want to proceed without J&J being there. So, this Texas two-step, it’s controversial for sure; it’s been utilized by some other asbestos defendants over the last several years to try to avoid liability such as what Johnson & Johnson’s done. Or limited its liability, really.

But it’s a significant problem because you’ve got a company that’s not really bankrupt. You’ve got a company that’s not really under any kind of financial distress. So, what ultimately occurred, we will try to keep it short, is eventually the creditor’s committee, so people like me, an attorney representing victims of exposure from these products, we’re just creditors in the bankruptcy system, and there are existing creditors and there’s future creditors.

And we had filed a motion to dismiss the bankruptcy to try to keep it out of that system and put it into the tort system where it belongs. The bankruptcy judge in New Jersey felt that it was just impossible to get through all of these cases through the ordinary common tort system. And so, he refused to dismiss the bankruptcy.

A Court of Appeals Dismissed the Bankruptcy Case

And what occurred after that was there was an appeal, the Third Circuit Court of Appeals, and long story short, the Third Circuit dismissed the bankruptcy. The Third Circuit ultimately determined that LTL, which had access to this huge pool of money that J&J was kind of offering behind the scenes, that LTL had plenty of money to deal with the lawsuits and whatever liabilities it had, at least for the foreseeable future. And then of course, J&J, which is a massive Fortune 50, Fortune 100 company, J&J is certainly not under financial distress.

And that’s the standard. You can’t take advantage of the bankruptcy process unless you are in significant financial distress. And you and I as individuals would not be able to do what Johnson & Johnson and LTL did, and certainly corporations should not be treated better than people. And that’s what the Third Circuit did. After a series of stuff that occurred after that, ultimately the Third Circuit’s decision becomes final, and it goes back to the bankruptcy court with what’s called a mandate.

J&J Refiled for Bankruptcy, Courts Dismissed the Case

And the mandate requires the bankruptcy court to dismiss the bankruptcy. That’s the Third Circuit’s instructions of the New Jersey bankruptcy court. And that’s exactly what happened. The judge there dismissed it, and about three hours later, Johnson & Johnson / LTL filed another bankruptcy. And again, the whole process began; they requested a stay of not just cases involving the debtor, LTL, but also requested a stay of all litigation everywhere in the United States.

And I won’t bore everybody with all the details, but for the most part they got the benefit of that. And since they filed the new bankruptcy in April, only one case was allowed to be tried anywhere in the United States, and that was through the blessing of the bankruptcy court. But all other cases, trial stayed, and Johnson & Johnson essentially got to hang back and preserve its money until last Friday, and now the bankruptcy’s dismissed.

And there will be some further appellate scenarios that will occur, but for all intents and purposes, as of this moment, it’s back in the tort system and folks can proceed for these deadly cancers, mesothelioma and ovarian cancer.

Now, Personal Injury Lawsuits Against the Company Can Move Forward

John: Right, absolutely. So, you mentioned that, I had read there were 40,000 lawsuits pending against Johnson & Johnson. You’re saying that there’s maybe even upwards of 60,000 relating to ovarian cancer and mesothelioma cancer cases. So, what’s the status now of all of those cases after this ruling?

Paul: So, John, the status is certainly that now those cases can all move forward. Of course, when you’re talking about those kinds of numbers, it’s difficult to imagine how some of the courts will move forward. I have a handful of cases that are spread out through the United States, and I’ve had an expectation that our cases will be able to get tried within the next year or two.

But there’s something called a multi-district litigation, MDL, where most of the ovarian cancer cases sit, and that’s also in New Jersey. And there’s going to be a bit of a challenge to get some of those cases to trial and for any of those claimants to get proper recourse for what’s happened to them. But those are challenges that all of the attorneys that are representing the claimants are willing to take on. The court system is certainly going to encourage settlements and other resolutions in any way.

And to a certain extent, it’s going to be up to Johnson & Johnson. Is it going to continue this charade? Is it going to continue fighting these cases despite the massive amount of evidence demonstrating that its product contains asbestos and causes disease? Or at some point, will somebody make a sensible decision to try to fairly resolve cases because that’s really what it comes down to. And the bankruptcy process was intended to resolve cases, but not fairly, fairly to Johnson & Johnson, but not the people and their families who have to live with this terrible cancer or in many instances die with this terrible cancer.

Can Johnson & Johnson File for Bankruptcy Again?

John: Right. Now, Johnson & Johnson has filed for bankruptcy twice. Is there anything preventing them from filing again. Is this the end of that process?

Paul: That’s complicated and I would say that the answer to the first question, nothing’s stopping them from filing again. I mean, anybody can file whatever they want, but they’ve been told twice now that they have plenty of money, that they’re not under financial distress.

I would certainly proceed cautiously if I was counseling Johnson & Johnson / LTL, if I was their attorney. My suspicion is that at some point they will file again. And I don’t know whether it’ll be this year, next year, five years from now. The bankruptcy court has essentially said, as things stand right now, you’re not under financial distress. And that is really the sole factor. And so, any future filing, it would have to demonstrate a lot more sufficiently than it has up to this point that either of the entities are under financial distress.

John: So, they have to demonstrate that significant things have changed since the initial ruling. And maybe it’s that, yeah, a couple of years worth of cases have been resolved and they’ve had to pay out settlements or something like that. And then they say, okay, now we’re in distress. But until that happens, they really need to proceed cautiously.

Paul: And I would think that it’d be very difficult for a company like Johnson & Johnson to ever really prove that. I mean, it has its hands involved in a lot of things. I won’t tell you that I know its exact number on the Fortune 500 list, but it’s pretty high up there. And jury verdicts, some verdicts have been high, some verdicts have been lower, and I think that Johnson & Johnson and its subsidiaries and anybody else paying can pay quite a bit of money to claimants without ever really being in financial distress.

I think the problem is its insistence. The fight and everything has really increased its cost significantly. I mean, if you’ve got 40 or 50 cases that have gone to trial over the last several years and it’s paying five or 10 million dollars a case to its lawyers, I mean, you do the math, it’s going to get into the billions of dollars just paying its own lawyers.

I get it, everybody has a right to a defense. They have a right to make whatever decisions they want, but when you get dinged for 30 and 40 million in some instances, 2 billion dollars for a series of 22 women, those litigation costs are really significant. And I would suggest that they could probably resolve a lot of cases without spending a lot of money and without really putting itself in any jeopardy.

But they’ve got a lot of motives that quite frankly, aren’t in good faith. And that’s really what two bankruptcy dismissals have demonstrated, that it’s conducted itself in bad faith and we have no reason to believe that it suddenly is going to change course and start behaving in good faith.

Why J&J’s $8.9 Billion Cancer Claim Settlement Is Not a Good Deal for Victims

John: Sure. So, Johnson & Johnson’s latest bankruptcy claim included a settlement deal of 8.9 billion to cover existing and future cancer claims, and some of the plaintiff’s law firms actually supported this settlement. Why do you think that that was a bad deal and that jury trials should be allowed to continue?

Paul: And that’s a great question because 8.9 billion dollars certainly sounds like a heck of a lot of money. But my understanding of the current number is that now there are 58,000 cases, ovarian cancer, mesothelioma. Most of those are ovarian cancer cases that have been filed. But this proposed settlement in bankruptcy would also pertain to future claimants.

And so, if we have this many past claimants, well, my goodness, Johnson & Johnson didn’t stop manufacturing this product with asbestos until 2020, 2021. So, there is the potential of 50 to 60 more years of claims, maybe longer, to be filed. And so, the money that’s being paid would have to not just compensate and protect the interest of current claimants, but it would also have to protect the interest of future claimants. So, there’s two reasons why this is not a good deal. Number one, most people would only end up with 40 or $50,000.

That’s gross. That’s before they pay their attorneys. That’s before they pay Medicare, health insurance companies, which we can probably get into a long discussion over that. But when we’re talking about what they net, I mean they may not get anything or net 5, 10, $15,000. I’ve been doing this for a long time, regardless of whether it’s ovarian cancer or mesothelioma, I mean medical bills are astronomical, the impact to one’s ability to earn money and do their job is devastating.

I mean, most people die of mesothelioma, and so they can’t work. If they’re young, 40 or 50 years old, I mean, their life expectancy and earning expectancy has been shattered, not to mention pain and suffering and those sorts of things.

So, to give somebody that’s dying of a terminal cancer or to give to a family of a loved one who died of terminal cancer and say, here you go, here’s $15,000. I mean, it’s a slap in the face and it’s a total insult. The other reason why it’s a problem is that the proposed agreement or proposed settlement would pay out over a period of years, and I’ve heard 10, 20 years. So even if it was $200,000, I mean they’re getting $10,000 a year. Not helpful. Not helpful at all. And obviously when you’re talking about paying something over time, so many things can happen over 20 years. Who knows if people would get paid for the full term, even if it was a fair amount.

John: Right, or that the payments would stop after they potentially have passed away or something like that. And then, yeah, that would be the end of it.

Paul: Absolutely.

Filing Cases Against J&J for Causing Cancer With Its Talcum Powder

John: What comes next then in this, and this is a pretty complex case involving Johnson & Johnson and mesothelioma and ovarian cancer cases. What sort of happens next now?

Paul: Well, we keep fighting, those of us that are representing people that have been afflicted by cancer from exposure to this product. We keep fighting. We keep fighting in the tort system. We keep trying these cases and file cases against Johnson & Johnson and these entities for causing this cancer.

It will be a challenge. As I mentioned before, there’s a lot of cases and it’s imposed a burden on the trial courts. Hopefully Johnson & Johnson will try to deal fairly with some folks, even if they don’t want to, just as a business practice.

But our plan is to try every case that we can, if the defendant will not resolve them. What’s Johnson & Johnson’s plan? Your guess is as good as mine. I suspect that it will continue to seek strategies to avoid having to pay fair value to people. It will continue to misrepresent what’s in its product and what historically has been in its product. And that’s just what’s going to happen.

But we will continue to fight that until we reach resolution for each and every person that’s been afflicted or eventually Johnson & Johnson gets what it wants. But I think it’s going to be a long journey for J&J to ultimately get what it’s been seeking for these last three or four years.

Contact Satterley and Kelley to Learn More

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

Paul: Thanks, John.

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