How bankruptcy could help Johnson & Johnson Corral Huge talcum powder dispute

Johnson & Johnson told personal injury attorneys it was considering bankrupting a subsidiary to quash thousands of lawsuits alleging its talc-based baby powder caused ovarian cancer and mesothelioma, according to people familiar with the matter. A spokesperson for the company said it had not decided on any action to be taken regarding the talc lawsuits except to defend the safety of the talc and litigate the pending claims.

Here’s how a Chapter 11 filing could affect the legal battle between the health giant and the thousands of people who blame one of its flagship products for their cancer.

Why would J&J use bankruptcy?

Bankruptcy gives businesses several tools to resolve any liability claims they face now or in the future regarding products that cause injury or are defective in some way. After filing for bankruptcy, lawsuits in each state and federal court are automatically stayed and brought before a single bankruptcy judge.

Consumers have alleged in thousands of lawsuits against J&J that the talcum powder in Johnson’s Baby Powder and Johnson’s Shower to Shower can cause inflammation that leads to cancer. Other complaints allege that talc products were contaminated with asbestos. J&J has denied the allegations and has defended itself for years against talc-related litigation.

A bankruptcy filing by a subsidiary of J&J would put an end to the pending lawsuits, at least for a period of time. The publicly traded parent company could benefit from the automatic suspension even if only one affiliate has filed for bankruptcy.

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