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• J&J criticized for using bankruptcy process to get rid of thousands of claims alleging its talc-based products caused cancer
• J&J said bankruptcy is an appropriate response to an unpredictable wave of lawsuits
A Johnson & Johnson (NYSE: JNJ) subsidiary on Monday faced heat in court for attempting to use the bankruptcy process to get rid of thousands of claims alleging its talc-based products caused cancer.
The subsidiary, LTL Management, is trying to remain in bankruptcy claiming that it is best option to reach an "equitable, efficient, and consensual resolution" of more than 38,000 claims alleging J&J’s baby powder and other talc-based products caused cancers including mesothelioma.
J&J, on the other hand, argues that its talc products are safe.
J&J had adopted “Texas two-step”, by which companies can split in two via a merger. One part of the company has all the valuable assets while the other has all the liabilities.
Criticism of bankruptcy strategy
Some lawmakers have, though, criticized J&J for adopting the bankruptcy strategy.
Lawyers for the plaintiffs say that if LTL is allowed to proceed with bankruptcy, it would allow J&J to cap the payout at $2 billion for people who have been harmed.
Brian Glasser, an attorney who represents mesothelioma claimants, said on Monday if J&J reached settlements for all the 38,000 cases, it would have about $5.5 billion in liability.
"Just because Johnson & Johnson is both rich, and fearful of reputational harm, does not give it a right to opt out of the jury system," Glasser said.
LTL has said that bankruptcy is an appropriate response to an unpredictable and "potentially financially ruinous" wave of lawsuits.
"To litigate the same claims over an over in the tort system is a complete waste," Greg Gordon, a lawyer for LTL, told the court.
Shares of J&J were down 1.8% at $164.66.
Picture Credits: Reuters