Attorneys Vow to Oppose J&J’s Third Bankruptcy Attempt

Rhea-AI Summary

Johnson & Johnson (NYSE:JNJ) has filed a pre-packaged bankruptcy in Texas, claiming 83% of surveyed plaintiffs agree to the plan's terms. Attorneys representing ovarian cancer victims linked to J&J's talc products vow to seek dismissal, calling it a fraudulent effort to manipulate the bankruptcy process. They argue that the proposed compensation is inadequate, with average medical costs for treating ovarian cancer exceeding $220,000 and lost wages averaging over $230,000.

Lawyers question the integrity of the voting process and cite the recent U.S. Supreme Court ruling in Harrington v. Purdue Pharma as a reason why J&J's plan should not succeed. They also criticize J&J's choice of filing in Texas as forum shopping. Previous bankruptcy attempts by J&J were found to be in bad faith by courts in New Jersey and the Third Circuit.

Positive

• None.

Negative

• J&J faces legal challenges over its talc products linked to ovarian cancer
• Proposed compensation in bankruptcy plan may be inadequate for ovarian cancer victims
• Allegations of ballot manipulation in bankruptcy voting process
• Potential for prolonged legal battles and delayed compensation for claimants
• Previous bankruptcy attempts by J&J were ruled as bad faith filings
• Accusations of forum shopping by filing in Texas instead of New Jersey

Insights

Legal Expert

Johnson & Johnson's third bankruptcy attempt faces significant hurdles. The Supreme Court's ruling in Harrington v. Purdue Pharma sets a precedent against using bankruptcy to shield solvent entities from liability. This, coupled with allegations of ballot manipulation and forum shopping, weakens J&J's position. The company's choice to file in Texas, away from its New Jersey home base, may be viewed unfavorably by the court. Previous rulings found J&J's bankruptcies were filed in bad faith, lacking financial distress. The proposed compensation appears inadequate compared to typical ovarian cancer treatment costs, averaging $220,000. The "Texas Two-Step" tactic is under legislative scrutiny, further complicating J&J's strategy. This case could set a significant precedent for corporate accountability in mass tort cases.

Financial Analyst

J&J's bankruptcy strategy seems at odds with its strong financial position. With a market value of $400 billion and annual revenue of $90 billion, the company's attempt to use bankruptcy protection appears questionable. This move could potentially impact investor confidence and the company's reputation. The proposed compensation plan, if approved, might result in significant cost savings for J&J compared to potential jury awards. However, the legal challenges and potential for prolonged litigation could offset these savings. The uncertainty surrounding the timing and amount of payments to claimants adds another layer of financial complexity. Investors should closely monitor this situation, as it could have long-term implications for J&J's financial health and legal liability exposure.

Medical Research Analyst

The J&J talc case highlights the complex intersection of science, law and corporate responsibility in healthcare. The Daubert standard for scientific evidence is important here, as it determines which claims are scientifically sound. Ovarian cancer treatment costs vary widely, from $50,000 to over $1.5 million, depending on cancer stage and patient age. This variance complicates fair compensation calculations. The alleged link between talc use and ovarian cancer remains controversial in the scientific community, with studies showing mixed results. This scientific uncertainty adds another layer of complexity to the legal proceedings. The case underscores the need for rigorous, long-term safety studies on consumer products and transparent communication of potential risks to the public.

Allegations of ballot manipulation, legal precedent and forum shopping pose major obstacles to company’s plan

HOUSTON--(BUSINESS WIRE)-- Attorneys representing tens of thousands of women with ovarian cancer linked to use of Johnson & Johnson (NYSE:JNJ) talc products say they will immediately seek dismissal of a pre-packaged bankruptcy that the company filed earlier today in Texas.

In its filing, the New Jersey-based pharmaceutical giant claims that approximately 83% of those plaintiffs surveyed by the company have agreed to the plan’s terms, a percentage that forms the legal threshold for launching a so-called “pre-pack” bankruptcy.

“We view this so-called vote as another fraudulent effort by J&J to manipulate the bankruptcy process and minimize the legitimate claims of ovarian cancer victims,” says Andy Birchfield of the Beasley Allen Law Firm. “It’s preposterous for a company valued at $400 billion, with $90 billion in annual revenue, to resort to bankruptcy to unfairly compensate the women whose lives it has irreparably harmed.”

The Financial Reality

Even if the amount that J&J proposes to pay plaintiffs as part of its bankruptcy plan were confined to scientifically sound, Daubert-tested claims (the legal standard for scientific evidence), the average compensation per claim would still be significantly less than even the medical costs to treat most ovarian cancer patients.

"This proposed compensation is a gross undervaluation," said Birchfield. "Ovarian cancer claims involve measurable costs that are far greater than what is being offered."

• Medical expenses for treating ovarian cancer can range from more than $1.5 million to less than $50,000, depending on the age of the victim and the stage of the cancer.
• The weighted average of medical costs for treating ovarian cancer is more than $220,000. Likewise, lost wages are objective and calculable.
• Lost wages for ovarian cancer claimants average more than $230,000.

Beyond these objective costs, attorneys note there are subjective factors such as pain and suffering and punitive damages that merit consideration. The pain and agony that ovarian cancer victims experience is staggering – certainly to be valued at a multiple of the medical costs.

Also, attorneys representing ovarian cancer victims question the integrity of the bankruptcy voting process. “We believe there are major irregularities in J&J’s voting process that were designed to make a mockery of the pre-pack process, including votes from people who have cancer, but not ovarian cancer,” Birchfield said. “There’s no reason for them to be a part of this process.”

“Accepting liability for someone’s illness without a legal claim is something J&J would never otherwise consider or accept but for the opportunity to use those votes to stuff the ballot box and overwhelm the votes of ovarian cancer victims whose claims have been prosecuted in both federal and state court, just a further example of the company’s hypocrisy in this litigation.”

Birchfield also points to the recent ruling by the U.S. Supreme Court in Harrington v. Purdue Pharma as a reason that J&J’s plan should not succeed. In that case, the Court ruled that a multibillion-dollar bankruptcy plan for Purdue Pharma, the maker of the opioid OxyContin, could not move forward because the plan shielded the company’s wealthy owners from liability for opioid-related claims.

“Even with an overwhelming majority of creditors approving the indemnification scheme, the Court ruled financially solvent entities or individuals cannot use the bankruptcy courts as a shield to escape liability for marketing and manufacturing dangerous products,” Birchfield said. “J&J’s plan mirrors the fraud attempted by the Sackler family and offers another reason for denial.”

Forum Shopping and Legal Precedent

In addition, Birchfield says J&J’s filing in the Southern District of Texas should also raise questions.

“This is a blatant attempt at forum shopping that has been denied before and should be again,” he says. “There is no legitimate reason to allow J&J to pursue this case in Texas, and this court should at the very least transfer the case to New Jersey, just as a North Carolina court did previously.”

In the company’s two earlier bankruptcy filings, the New Jersey court as well as the U. S. Court of Appeals for the Third Circuit found that J&J filed bad faith bankruptcies, ruling that J&J and its shell subsidiary did not warrant bankruptcy protection as financial distress was lacking.

Empty Promises to Victims

Beyond the inadequacy of J&J’s proposed financial compensation, an equally alarming concern is the complete uncertainty surrounding when, if ever, ovarian cancer victims will receive payment. Similar bankruptcies have dragged on for years without claimants seeing any compensation.

“We will urge the court to scrutinize J&J’s promises closely,” Birchfield said. “The public must understand that J&J is not committing to timely or guaranteed payments. If this plan is imposed on claimants, J&J will effectively escape accountability for its talc-contaminated baby powder, and ovarian cancer victims may never see just or equitable compensation.”

The tactic of stashing liabilities in a subsidiary and then plunging it into bankruptcy to stymie litigation – known as the “Texas Two-Step” – is also facing legislative scrutiny. Bipartisan legislation has been introduced in both the U.S. Senate and House of Representatives to prohibit both the practice and stays of litigation against non-bankrupt affiliates involved in the maneuvers.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240920137771/en/

Barry Pound

Barry@androvett.com

214.293.0860

Mark Annick

Mark@androvett.com

214-213-1754

Source: Beasley Allen Law Firm

FAQ

Why is Johnson & Johnson (JNJ) filing for bankruptcy?

Johnson & Johnson (JNJ) is filing for bankruptcy as a strategy to manage and potentially limit its liability in talc-related ovarian cancer lawsuits. The company claims this pre-packaged bankruptcy has support from 83% of surveyed plaintiffs.

What are the main objections to Johnson & Johnson's (JNJ) bankruptcy filing?

The main objections include allegations of ballot manipulation, inadequate compensation for victims, forum shopping by filing in Texas, and concerns that the bankruptcy process is being used to unfairly minimize legitimate claims of ovarian cancer victims.

How much does ovarian cancer treatment cost compared to Johnson & Johnson's (JNJ) proposed compensation?

The average medical costs for treating ovarian cancer exceed $220,000, with lost wages averaging over $230,000. Attorneys argue that Johnson & Johnson's (JNJ) proposed compensation in the bankruptcy plan is significantly less than these costs.

What legal precedent might affect Johnson & Johnson's (JNJ) bankruptcy plan?

The recent U.S. Supreme Court ruling in Harrington v. Purdue Pharma, which prevented financially solvent entities from using bankruptcy to shield themselves from liability, is cited as a potential obstacle to Johnson & Johnson's (JNJ) bankruptcy plan.