Lawmaker Blasts Johnson & Johnson Talcum Powder Bankruptcy Plan on U.S. Senate Floor

Durbin said the Johnson & Johnson talcum powder bankruptcy plan should be rejected by the courts.

A prominent U.S. Senator lambasted Johnson & Johnson on the U.S. Senate floor this week, over a controversial bankruptcy maneuver the company is using to try to avoid massive liability it faces in talcum powder lawsuits filed by women diagnosed with ovarian cancer and other injuries.

U.S. Senator Dick Durbin, the Democratic Majority Whip and chair of the powerful Senate Judiciary Committee spoke on the Senate floor on Tuesday, describing Johnson & Johnson’s tactics as “shameful” and calling for the courts to reject the company’s so-called “Texas Two-Step” bankruptcy filing. He also called for Congress to close legal loopholes in U.S. bankruptcy laws, which allow these types of filings to occur.

Johnson & Johnson currently faces about 38,000 Baby Powder lawsuits and Shower-to-Shower lawsuits brought throughout the federal court system by women alleging that talc and asbestos particles in the products caused women to develop ovarian cancer, mesothelioma and other injuries.

In response to mounting litigation costs and a number of massive verdicts returned in early trial dates, Johnson & Johnson announced in October that it had spun off any liability exposure it faces from the litigation into a new company, LTL Management, LLC, which was formed for the express purpose of placing the new unit into bankruptcy. The move has been viewed as largely a negotiating attempt to force plaintiffs to accept less compensation than they seek, since Johnson & Johnson has sufficient assets to cover liability exposure it faces for failing to warn consumers about the risks associated with its talc products.

The Johnson & Johnson talcum powder bankruptcy plan has been widely criticized by plaintiffs lawyers, as well as bankruptcy experts, as an abuse of the legal process and effort to delay a series of trials that were expected to go before juries this year.

Durbin said, if approved, the filing would make disparities in the justice system, which he says favors the rich, as well as powerful corporations, worse than they already are, by allowing Johnson & Johnson to avoid accountability for products which harmed consumers.

The criticism comes as hearings began this week before U.S. Bankruptcy Judge Michael Kaplan, who must determine whether the bankruptcy filing by J&J spin-off, LTL Management, can move forward. He will oversee hearings throughout this week after plaintiffs moved to have the filing rejected.

Plaintiffs say Johnson & Johnson, which has massive cash reserves, has no financial distress which would merit a bankruptcy filing. However, if the bankruptcy is allowed to move forward, settlements for talcum powder cancer and asbestos lawsuits may be capped at $2 billion.

“I hope the courts reject Johnson & Johnson’s abuse of federal bankruptcy laws,” Durbin said. “But I also believe that Congress must act to close this loophole for good. I hope Democrats and Republicans can work together on a bipartisan basis to stop this bankruptcy abuse.”

Defending against the talcum powder litigation has already cost Johnson & Johnson $1 billion, on top of Baby Powder settlements and verdicts that have amounted to another $3.5 billion, according to the bankruptcy filing.

Most of the U.S. talc litigation is currently pending in the federal court system, where the cases are centralized before U.S. District Judge Freda L. Wolfson in the District of New Jersey, as part of an MDL or multidistrict litigation. Prior to the bankruptcy filing, the Court was planning to hold a series of talcum powder “bellwether” trials beginning in April 2022, which have now been delayed after a stay on all proceedings was issued by the U.S. Bankruptcy Court.