Can Johnson & Johnson just quit their racist, carcinogenic baby powder business?
On October 12, Johnson & Johnson announced that the corporate restructuring had created a “separate” subsidiary named LTL Management LLC for its baby powder and other talc-based products. About 48 hours later, the healthcare giant said its new division had “filed for voluntary Chapter 11 bankruptcy.” A company press release regarding the petition noted that “Johnson & Johnson and its other subsidiaries have not filed for bankruptcy” despite allegations of empty coffers during its spin-off.
Why should J&J, one of the world’s most profitable multinational conglomerates, with an estimated value of over $ 400 billion, plead poverty on behalf of one of its properties? The short answer seems to be to avoid potentially paying tens of billions to litigants who allege J&J knowingly sold talcum powder containing carcinogenic asbestos.
“These women rely on our justice system to hear their cases, give them the chance to present the facts, speak about the science and speak out about the harms they suffer,” said Representative Katie Porter (D-CA) m ‘said. “What we are seeing is a huge business game with the legal system to shut the doors of the courthouse to these victims. They leave the assets, the resources, the income in one company, and they put their debts, their debts in another company. And this is problematic because it means that victims have no way of being paid for the damages caused by the company. And this is unfortunately not new. But it is particularly glaring. There is a very, very blatant way of doing this. “
Porter, a full professor who taught bankruptcy law from 2004 until he was elected to the House in 2019, explained that J&J was using a proven business ploy known as the “Texas Two-Step.” Lone Star State laws allow companies to split up part of their business and declare it as a separate entity, offload the tort liability the parent company faces at the new branch, and then file for bankruptcy to put the brakes on litigation and cap their potential payments to claimants, while continuing to operate as usual.
J&J, who is based in New Jersey but has filed for Chapter 11 in Texas, said as part of “his commitment to resolve cosmetic talc cases,” he “will establish a $ 2 billion trust. “for the settlements that LTL Management is ordered to pay. But there are around 38,000 pending lawsuits, and in just one case in 2018, J&J was ordered to pay $ 4.7 billion. (J&J appealed all the way to the U.S. Supreme Court, which declined to hear the case. The settlement was ultimately reduced to $ 2.1 billion in a lower court, even more per se than the pledged assets of the LTL Trust.)
In the wake of LTL’s bankruptcy news, Porter took to Twitter to call out the company’s board game, writing: “J&J knew asbestos bound some bottles but kept it a secret for a while. decades.”
With those 38,000 lawsuits filed by women with diseases such as mesothelioma and ovarian cancer, Porter wrote, “The company wants to protect its assets. J&J has sold the powder for 60 years, and now that he has to pay these women’s medical bills, he wants the courts to treat ‘Johnson & Johnson Baby Powder’ as a separate business, “Porter wrote, calling the laborers of NOT A WORD “an injustice. “
“We are taking these steps to provide certainty for all parties involved in the cosmetic talc business,” Michael Ullmann, general counsel for J&J, said in a statement. “As we continue to be a strong advocate for the safety of our talcum cosmetic products, we believe that resolving this issue as quickly and effectively as possible is in the best interest of the company and all stakeholders. “
A Reuters investigation in 2018 revealed that internal J&J documents showing the company knew of traces of asbestos in its products dated back to 1957. In the early 1970s, the New York Times reported, a J&J executive warned superiors about asbestos contamination of the company’s iconic Baby Powder brand and suggested that “the company is ‘improving’ its quality control of talc.” A few years later, as the presence of asbestos in talc-based products became of concern to federal regulators, J&J told FDA officials it had found no evidence of asbestos in talc products made between December 1972 and October 1973. tell the agency that at least three tests carried out by three different labs from 1972 to 1975 found asbestos in its talc – in one case at levels reported as “rather high”, “Reuters reports.
J&J kept these findings secret from the public with the help of the FDA. The Times quotes a 1976 memo in which “an executive finally obtained assurance from a Food and Drug Administration official that the findings would only be released” on my corpse. “
But fears about carcinogens in J&J talc products began to swirl over the following decades, and the company saw a decline in the number of consumers. A 1992 J&J note discovered by Reuters noted that 52% of black women and 37.6% of Hispanic women regularly used talcum powder, exceeding the rate of use by white women. The paper then suggested that the company consider “ethnic (African American / Hispanic) opportunities to develop the franchise.”
More than a decade later, in 2006, internal J&J documents indicated that future marketing efforts target “underdeveloped geographies with warm weather and higher AA. [African American] population. ”In the same year, the World Health Organization had already started sounding the alarm bells on the potential carcinogenic properties of asbestos. Since then, the CDC, EPA, NIH, OSHA , the Dept of Housing and Urban Development and the WHO all wrote that “there is no safe level of exposure to asbestos”.
In a media statement released in October, J&J noted that the creation of a trust within LTL Management to resolve the lawsuits facing the company is “not a concession of liability but rather a means of achieving. fair and effective resolution of complaints raised in cosmetic talc litigation.
Porter points to a bankruptcy process – she calls it “you buy the ticket, you do the ride” – that requires Chapter 11 “ticket buyers” to complete the legally mandated “ride” through a process of establishment of facts, which creditors can follow. participate, before any debt help can arrive. But “non-debtor discharges”, which companies increasingly use to their advantage, help people within the company, who might also have some responsibility, to bypass this process.
“What non-debtor releases do is provide a free jail release card. You are lucky that you don’t have to pay all of your debts. Maybe you pay some of it. – let’s say 10 cents on $ 1. Non-debtor dumps say that even if you – related business, business owner, large business shareholder, parent subsidiary – even if you are not a bankrupt debtor , you can get debt reduction, liability elimination, even if you haven’t gone through the process of filing for bankruptcy, disclosing your assets, and granting those rights to your creditors. we saw in the Sackler case. Individual members of the Sackler family are not bankrupt in the sense that they are broke. Nor are they bankrupt in the sense that they haven’t gone bankrupt. Purdue has filed for bankruptcy, but the court is still considering granting them releases p our non-debtor – that release card from jail, even if they didn’t do the job. And that’s also a problem with Johnson & Johnson. In other words, they’re basically doing what we call the Texas Two Step, and the goal is to get a business version that keeps all assets of the same type.
The Sackler family, the billionaire owners of OxyContin maker Purdue Pharma, recently used a non-debtor discharge to gain individual immunity from any lawsuits that may target their personal wealth. As a recent Intercept article noted, under the Purdue Pharma bankruptcy deal, the Sacklers will retain “at least $ 6 billion in total assets, money that will effectively be untouchable.” Meanwhile, groups such as Koch Industries, which created and almost immediately filed for bankruptcy for a division named Bestwall, and mining giant Peabody Holdings, owner of the new and also bankrupt Patriot Coal, have also been accused of having used the Texas Two-Step to protect money from lawsuits brought by those who claim they have been wronged by these companies.
Porter is a co-sponsor of two bills – the Non-Debtor Releases Prohibition Act and the Stop shielding Assets from Corporate Known Liability by Eliposing non-debtor Releases) Act – which she claims would eliminate some of the corporate tricks employed by companies facing debt.
“The Non-Debtor Discharge Prohibition Act requires bankruptcy courts to hold a hearing to determine whether a bankruptcy has the intention or the foreseeable effect of dividing the liabilities of the bankrupt company. And if that’s true, the judge is supposed to dismiss the bankruptcy case. Which is quite appropriate as it is an abuse of process of [use bankruptcy to escape liability]. And the Sackler Act also deals with discharges of non-debtors. These bills are in judicial committee, ”Porter told me. “These problems are not new. But companies are getting more and more emboldened.
J&J – who like Sacklers’ Purdue unit has been the subject of numerous lawsuits over its role in the opioid crisis – has reportedly provided hundreds of thousands of dollars for lobbying efforts against the bill.
Last week, a federal bankruptcy judge dismissed J&J’s request to freeze cases, “including some that are about to go to a jury”, filed against J&J over its products. talcum powder. Lawsuits against LTL will be terminated in accordance with bankruptcy laws. J&J, which stopped selling baby powder and other talcum products in 2020, is due to return to court in early November. Porter told me she was monitoring the case.
“This is an example of what I see as a bigger issue, and that is how our laws provide for extreme levels of limited liability for companies,” Porter said. “Certainly the only reason we have corporate statutes is to allow people to form companies and not be personally responsible – it separates the responsibility from the individual, from the owner, from the manager or whatever. We’ve had this rule for a long time, but there must be a limit. We must have individual responsibility, and certainly corporate responsibility. So if you say corporations exist to take away that personal liability, then you better make sure corporations end up being responsible.
“Otherwise, it’s clear that in these bankruptcy cases, they’re not trying to give people their day in court and avoid having to litigate 30,000 individual cases. They try to make sure that they completely escape responsibility.