J&J mulls offloading lawsuits from Baby Powder to new company and bankrupting it: sources

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Johnson & Johnson is exploring a program to offload liabilities from wide Baby Powder litigation into a recently created concern that would past question bankruptcy protection, according to 7 radical acquainted with the matter.

During colony discussions, 1 of the healthcare conglomerate’s attorneys has told plaintiffs’ lawyers that J&J could prosecute the bankruptcy plan, which could effect successful little payouts for cases that bash not settee beforehand, immoderate of the radical said. Plaintiffs’ lawyers would initially beryllium incapable to halt J&J from taking specified a step, though could prosecute ineligible avenues to situation it later.

J&J has not yet decided whether to prosecute the bankruptcy program and could yet wantonness the idea, immoderate of the radical said. Reuters could not find whether J&J has retained restructuring lawyers to assistance the institution research the bankruptcy plan.

J&J faces ineligible actions from tens of thousands of plaintiffs alleging its Baby Powder and different talc products contained asbestos and caused cancer. The plaintiffs see women suffering from ovarian crab and others battling mesothelioma.

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“Johnson & Johnson Consumer Inc. has not decided connected immoderate peculiar people of enactment successful this litigation different than to proceed to support the information of talc and litigate these cases successful the tort system, arsenic the pending trials demonstrate,” the J&J subsidiary lodging the company’s talc products said successful a connection provided to Reuters. J&J declined further comment.

Should J&J proceed, plaintiffs who person not settled could find themselves successful protracted bankruptcy proceedings with a apt overmuch smaller company. Future payouts to plaintiffs would beryllium babelike connected however J&J decides to money the entity lodging its talc liabilities.

J&J is present considering utilizing Texas’s “divisive merger” law, which allows a institution to divided into astatine slightest 2 entities. For J&J, that could make a caller entity lodging talc liabilities that would past record for bankruptcy to halt litigation, immoderate of the radical said.

The maneuver is known among ineligible experts arsenic a Texas two-step bankruptcy, a strategy different companies facing asbestos litigation person utilized successful caller years.

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J&J could besides research utilizing different mechanics to effectuate the bankruptcy filing too the Texas law, immoderate of the radical said.

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A 2018 Reuters probe https://www.reuters.com/investigates/special-report/johnsonandjohnson-cancer recovered J&J knew for decades that asbestos, a known carcinogen, lurked successful its Baby Powder and different cosmetic talc products. The institution stopped selling Baby Powder successful the U.S. and Canada successful May 2020, successful portion owed to what it called “misinformation” and “unfounded allegations” astir the talc-based product. J&J maintains its user talc products are harmless and confirmed done thousands of tests to beryllium asbestos-free.

The blue-chip company, which boasts a astir $443 cardinal marketplace value, faces ineligible actions from much than 30,000 plaintiffs alleging its talc products were unsafe. In June, the U.S. Supreme Court declined to perceive J&J’s entreaty of a Missouri tribunal ruling that resulted successful $2 cardinal of damages awarded to women alleging the company’s talc caused their ovarian cancer.

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Plaintiffs’ lawyers presumption the two-step bankruptcy strategy arsenic 1 that skirts perchance costly settlements oregon judgments. Companies presumption it arsenic a mode to corral galore lawsuits successful 1 tribunal for businesslike negotiations that bankruptcy instrumentality dictates for asbestos liabilities. The institution extracurricular bankruptcy tin scope a backing statement with the entity navigating a tribunal restructuring to screen aboriginal colony payments.

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In 2017, Brawny insubstantial towels shaper Georgia-Pacific utilized the Texas instrumentality to determination asbestos liabilities to an entity that aboriginal filed for bankruptcy successful North Carolina.

Bankruptcy cases filed to resoluteness litigation, including those related to asbestos, often instrumentality years, and astir ne'er afloat repay creditors. OxyContin shaper Purdue Pharma LP, for instance, is adjacent resolving thousands of opioid lawsuits aft 2 years of bankruptcy negotiations with a program valued astatine much than $10 cardinal to code trillions of dollars successful claims.

Another company, DBMP LLC, filed for bankruptcy past twelvemonth to resoluteness asbestos liabilities and said the lawsuit could instrumentality up to 8 years, according to a institution property release.

J&J besides faces litigation alleging it contributed to the U.S. opioid epidemic and precocious recalled definite spray sunscreen products aft discovering immoderate of them contained debased levels of benzene, different carcinogen.

The institution successful June agreed to wage $263 cardinal to resoluteness opioid claims successful New York. It has denied wrongdoing related to its opioids.

(Additional reporting by Nate Raymond; editing by Vanessa O’Connell and Edward Tobin)

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