Ex-Treasurer Testifies in J&J Talc Suit
She says J&J’s shunting of baby-powder liabilities into a separate unit, then putting that entity in bankruptcy, allowed the company to clearly define how big its talc liabilities would be.
Johnson & Johnson (J&J) adopted its controversial strategy for battling cancer claims tied to baby powder after a $2 billion court loss sparked concern that the company’s perfect credit rating could be damaged by the growing number of similar lawsuits, a retired J&J treasurer testified.
Michelle Ryan exchanged emails with credit rating firms previewing the company’s bankruptcy options last year, before the court strategy was implemented, according to records shown Tuesday in a federal trial on whether that tactic is legitimate. Through the maneuver, J&J shunted all its baby-powder liabilities into a separate unit and then put that entity in bankruptcy.
Victims suing J&J have asked U.S. Bankruptcy Judge Michael Kaplan in Trenton, New Jersey to dismiss the Chapter 11 filing of the unit, LTL Management, arguing that case wrongly manipulates the bankruptcy system.
The legal strategy would force a negotiated end to more than 38,000 lawsuits alleging that the talc in baby powder causes cancer. Should J&J lose, victims would be free to resume jury trials, potentially exposing the company to billions in additional payouts.
The consumer giant says it’s filed bankruptcy to create a fair and efficient process for paying all current and future talc claims. Advocates for cancer victims say the bankruptcy is just a way for J&J to cap how much it has to pay out.
Ryan testified that the bankruptcy would allow J&J to clearly define how big the talc liabilities would be. The company has repeatedly said the bankruptcy case is the best option because it will yield a trust fund that will pay all current and future talc claims.
After repeatedly vowing to fight all baby powder lawsuits one at a time around the country, J&J adopted a bankruptcy strategy last year, partly in reaction to a $2.24 billion verdict it was forced to pay to about 20 women, the company said in a court filing.
In bankruptcy, such lawsuits are typically put on hold while both sides try to negotiate a settlement. The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court, District of New Jersey (Trenton)
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