Johnson & Johnson’s controversial strategy to free itself from talc liabilities by creating a holding company for them and declaring bankruptcy has caught the attention of Congress.
The business-friendly scheme, known as Texas Two-Step, has been used by large corporations to protect their assets from liability in the face of a mountain of lawsuits, too expensive to litigate individually.
In the Senate on Tuesday, Dick Durbin (D-Illinois) castigated the move, highlighting a mesothelioma victim, who was denied the opportunity to take his case to court.
âThere is a justice system for the wealthy and powerful corporations, and there is a system for everyone else,â Durbin said. “And many days it seems like the rift between these two justice systems is widening and widening.”
Durbin’s comments come amid a court battle J&J is waging this week to protect his ability to use the strategy.
RELATED: Johnson & Johnson Bankrupts Talc Headache; plaintiffs will challenge the scheme
On Tuesday, an attorney for J&J’s bankrupt subsidiary, LTL Management, noted that the parent company was close to a talc settlement last year it would have cost $4 billion to $5 billion, more than double the amount J&J proposed to settle liability through bankruptcy proceedings. J&J has already paid $4.5 billion to resolve talc claims over the past five years, the company said in court documents.
The attorney, John Kim, also said the creation of LTL was necessitated by the backlog of mesothelioma and ovarian cancer cases that J&J was facing. He said that in 2020, new trials were being presented at the rate of one per hour, every day, reaching a total of 38,000 cases.
When the hearing began Monday in Trenton, NJ, bankruptcy attorney Laura Davis told the court, “This Chapter 11 model cannot be what Congress had in mind when it enacted” the federal code. bankruptcies.
There are other tentacles to the story. Earlier this month, activist investor platform Tulipshare – which aggregates stocks to promote change in business – revealed it wanted to leverage a vote for Stop J&J to sell its talc products overseas. The move prompted J&J to ask the SEC to exclude Tulipshare’s proposal from an upcoming proxy filing.
RELATED: J&J, Continuing Its Talc Bankruptcy Strategy, Faces Pressure From Investors To Pull The Product Worldwide
While J&J has stopped selling its talc product in the United States, it continues to do so overseas, insisting they are safe.
“For years, Johnson & Johnson has denied claims that its products contain asbestos,” Durbin said Tuesday. “But internal company documents obtained through the discovery process told a different story. They showed that Johnson & Johnson was aware of the presence of asbestos in their products while actively promoting the asbestos. use of this product by adults and its use on our babies.