Cancer Victims' Lawyers Ask To Dismiss J&J's 2nd Bankruptcy

Cancer Victims' Lawyers Ask To Dismiss J&J's 2nd Bankruptcy

Introduction

Lawyers for cancer patients stated in a court filing that Johnson & Johnson's second effort to settle talc cases through bankruptcy should be rejected as an unprecedented scam intended to deny plaintiffs proper recompense.

The lawyers claim J&J disregarded a January appeals court decision rejecting its initial attempt to settle the lawsuit, pointing out that a J&J subsidiary re-filed for Chapter 11 bankruptcy just two hours after the first bankruptcy was rejected by the court. The transaction was denounced by the attorneys as the biggest intentional false transfer in American history. In contrast to its first offer of $2 billion, Johnson & Johnson is now proposing to resolve all claims for $8.9 billion.

In a reiteration of past criticisms of the company's initial attempt to settle the litigation, the attorneys criticized its most recent maneuver as an illegal exploitation of the Chapter 11 system.

J&J carried through a contentious legal maneuver called a Texas two-step in October 2021. Its consumer business was split in half, and tens of thousands of talc claims were subsequently transferred to a newly formed company; this subsidiary then swiftly filed for Chapter 11 protection. The objective is to stop the onslaught of litigation and compel plaintiffs to settle everything in bankruptcy court.

The plaintiffs claim that J&J's talc-based Baby Powder and related cosmetic items caused mesothelioma and ovarian cancer. The corporation insists that the talc in its products is secure.

On the eve of a bankruptcy hearing, which marks the beginning of J&J's attempt to resurrect the settlement effort following the appeals court's denial, the plaintiffs' attorneys filed their brief. The Philadelphia-based 3rd U.S. Circuit Court of Appeals rejected the two-step strategy on the grounds that J&J's subsidiary LTL Management had no legal basis for filing for bankruptcy because it was not in financial difficulty. The commitment made by J&J to pay the firms an unlimited sum of money to resolve cases was mentioned by the court.

J&J revised its contracts in response and decided not to offer the subsidiary the same sort of guaranteed money it had previously. However, the new agreements amount to a fraudulent transfer since they keep tens of billions of dollars out of the hands of the plaintiffs, according to the attorneys for the cancer patients.

The document demonstrates the growing hostility from several plaintiffs' attorneys to the revised settlement proposal. The opposition will make it more difficult for J&J to triumph against anticipated challenges that are almost certain to use the same arguments the appeals court used to dismiss J&J's first subsidiary bankruptcy.

According to J&J, bankruptcy is the only legal venue that can end all ongoing and future talc claims. The business claims bankruptcy serves the interests of all parties by disbursing settlement funds more effectively and fairly than in trial courts, where some plaintiffs receive significant damages while others receive nothing.

According to Johnson & Johnson, its subsidiary's new finance arrangements allay the appeals court's worries while still making it possible to pay claims. Attorneys for cancer patients opposed to the deal said in their brief that the new funding arrangement presented a new legal issue: J&J, they claimed, had defrauded and shifted $50 billion of assets away from LTL Management in order to circumvent the appeals court's earlier decision.

The attorneys disputed the J&J subsidiary's justification that the financial reorganization didn't hurt talc claimants because the new agreements included funds to make up for it. If so, they contended, LTL Management still lacked financial difficulty at the time of filing for bankruptcy, which was the issue that led to the appeals court's denial.

In their court brief, the plaintiffs also contest J&J's assertion that its proposed settlement has broad support. They claimed that 40,000 claimants represented by more than 100 legal firms reject the agreement. By entering into partnerships with legal services providers who "have never filed a talc-related lawsuit against J&J," according to the attorneys for the opposing cancer patients, the business created the illusion of support.

The degree of support will be significant since a court won't sanction LTL Management's bankruptcy deal until it has approval from 75% of talc plaintiffs. This criterion, which is greater than in most conventional court restructurings, is necessary in bankruptcy cases involving asbestos.

In several claims, plaintiffs claimed that J&J's talc included asbestos, which the firm disputes. Regardless of how J&J does in its most recent bankruptcy strategy, the business has already been successful in delaying a financial and legal reckoning for a time.

According to plaintiffs' attorneys, it was the Texas two-step's main purpose, which they contended in a Monday filing. They said that the newly formed J&J subsidiary and other two-stepping firms have no activities, no employees, and no other commercial purpose than to protect their parent company from responsibility. The petition claimed that the entities were created "to stay in bankruptcy for years and years." "Their only business is causing delay."