Courts, Congress Likely to Stand in Way of J&J’s Third Texas Two-Step Plan
26 July 2024 - 11:38PM
Business Wire
U.S. Court of Appeals for 3rd Circuit latest to
reject unprecedented bankruptcy strategy
Lawyers on behalf of tens of thousands of ovarian cancer victims
are calling on Johnson & Johnson (NYSE: JNJ) to end its “war of
attrition against cancer victims.”
“The third time will not be the charm for J&J,” says Andy
Birchfield, head of the Mass Torts Litigation Section at the
Beasley Allen Law Firm, who has been instrumental in helping to
foil the first two attempts at bankruptcy by the
half-trillion-dollar company. “Recent developments in the courts
and in Congress should convince J&J to abandon its strategy and
act as a responsible corporation by providing truly fair and
reasonable compensation in a non-coercive resolution.”
On Thursday, the U.S. Court of Appeals for the 3rd Circuit
reinforced an earlier ruling that J&J could not stash its talc
liabilities in a shell subsidiary and then plunge it into
bankruptcy to stymie thousands of lawsuits alleging that its talc
products caused ovarian cancer and mesothelioma. The court found
the bankruptcy was filed in bad faith because the subsidiary, LTL
Management, LLC, was not in financial distress.
Earlier this week, a bipartisan group of congressional lawmakers
led by Sen. Josh Hawley (R-MO) and Sen. Sheldon Whitehouse (D-RI)
introduced legislation to ban the Texas Two-Step. The Ending
Corporate Bankruptcy Abuse Act (ECBA) of 2024 would deter the Texas
Two-Step and ensure injury victims have a chance to be heard in
court. The ECBA would instruct courts to presume a bankruptcy has
been filed in bad faith if it is a Texas Two-Step bankruptcy.
“Johnson & Johnson has brought this legislative action upon
itself by flouting the law and arrogantly pushing a failed
strategy,” says Leigh O’Dell, co-lead counsel for consolidated
multidistrict litigation. “The courts and Congress are saying that
J&J is not entitled to use the powerful tools of bankruptcy to
strip away the rights of cancer victims.”
Friday July 26 is the deadline for talc claimants to approve or
reject a third J&J bankruptcy attempt. A settlement plan aimed
at ending the litigation must receive 75% of all votes before the
company can proceed with another Texas Two-Step maneuver and
bankruptcy filing, this time in Texas. Opponents of the plan say
that proposed compensation unfairly shortchanges victims and their
families, many who have died or suffered for a decade or more.
“For J&J to lose this vote would be akin to Vladimir Putin
losing a Russian election,” says Mr. Birchfield. “J&J controls
the ballot. J&J determines who can vote and all the rules for
voting. J&J controls the agent that counts the ballots and
determines which votes will be counted and which ones will be
discarded. And this is all done without court supervision.
“However, there is a vast difference between winning the vote
through ballot stuffing and succeeding with a bankruptcy plan. This
will be J&J’s third attempt to use bankruptcy to shirk its
responsibility for its asbestos-laden talc-based baby powder. The
egregiousness of J&J’s scheme to use bankruptcy to evade
accountability and cap its liability has prompted bipartisan
congressional action with a bill that would curb the abuse of
J&J’s Texas Two Step.”
Beasley Allen is one of the country’s leading civil litigation
firms, holding several national records for verdicts and
settlements.
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Mike Androvett mike@androvett.com 214-507-5456
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