A North Carolina judge moved the Johnson & Johnson branch bankruptcy case to New Jersey on Wednesday, saying it was the most logical place since this is where most of the lawsuits involving his talc-based products were filed.
It was a blow to Johnson & Johnson, who formed the spin-off company, LTL Management LLC, in October and then quickly filed a Chapter 11 application to process tens of thousands of lawsuits claiming clients had developed cancer at because of the asbestos in its talc-based products.
Johnson & Johnson, based in New Brunswick, first established LTL Management in Texas and then moved it to North Carolina, a strategy that has become increasingly common among large, creditworthy companies seeking to protect their assets. assets by transferring liability for bodily injury to a branch in a friendly location. The maneuver, known as “two-step Texas”, has been criticized by plaintiffs, lawyers and some members of Congress, who say it is a way for wealthy companies to manipulate the bankruptcy system to bypass the financial consequences of harmful products. .
J&J defended the strategy, saying it was the best way for the company to deal with debts the bankruptcy court felt it had to pay. The creation of the spin-off included funding a $ 2 billion trust. So far, Johnson & Johnson has paid around $ 3.5 billion to settle with talcum plaintiffs or comply with verdicts.
The lawsuits allege the products contained asbestos and caused cancer. Most cases involve ovarian cancer and mesothelioma, a cancer often caused by exposure to asbestos. Johnson & Johnson has always rejected the link between its talcum products and cancer.
Following Judge Craig Whitley’s ruling in US Bankruptcy Court in Charlotte, LTL Management General Counsel John Kim said in a statement that while they disagreed with the change of venue, ” we will continue to work with all parties to seek an effective and fair solution. resolution.”
A lawyer whose firm represents around 10,000 plaintiffs in talc-related cases welcomed the move.
“We are grateful that the court recognizes that this case logically belongs to New Jersey where J&J is headquartered and where more than 30,000 victims seek justice,” said Andy Birchfield in a report. âNonetheless, a $ 500 billion company should not be able to manipulate the bankruptcy system – in any state – to avoid responsibility for decades of corporate negligence, and the resulting death and illness for thousands of victims. We look forward to the opportunity to raise these objections in a different and more appropriate place. “
Whitley granted Johnson & Johnson a stay, ordering a stay of talc-related lawsuits in state and federal courts for two months due to the Chapter 11 case being moved to New Jersey.
“All justice delayed is justice denied,” Birchfield said. âWe appreciate the judge asking for a 60 day ‘time out’ to allow a new judge to get up to speed on the issues. We will be prepared to make a compelling case in the New Jersey court as to why the suspension should not exceed 60 days. These women have the right to a trial and J&J should not be allowed to obstruct this right. “
Other large entities facing a slew of lawsuits, such as OxyContin maker Purdue Pharma, Georgia-Pacific and the Boy Scouts of America, have filed for bankruptcy protection. Georgia-Pacific used Texas in two stages, creating a subsidiary in Texas where it transferred its debts, and then filed for bankruptcy.
Whitley strongly indicated last month that North Carolina was an inappropriate location for the talcum bankruptcy case.
A receiver requested that the case be transferred to New Jersey on the grounds that LTL and talc responsibilities had no tangible connection with North Carolina.
âThe debtor’s ties to North Carolina are limited, fabricated and recent,â the administrator said in a motion referring to LTL, according to published reports. âThe debtor only existed two days before the date of the petition. “
Whitley noted that wealthy corporations created smaller entities in Texas, paid their debts there, and then filed for bankruptcy protection. While this may be strategically advised, the judge said it may also be interpreted as “manifestly unfair” to people being sued, according to a Wall Street Journal article.
“From this point of view, the idea that corporate profits could outweigh human tragedy is not something that seems very acceptable,” Whitley said.
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