Lawyers for Ovarian Cancer Victims Endorse Proposed Texas Two-Step Remedy

Rhea-AI Summary

Attorneys representing ovarian cancer victims in lawsuits against Johnson & Johnson (NYSE:JNJ) are advocating for the Ending Corporate Bankruptcy Abuse Act (ECBA). This bipartisan legislation aims to prevent solvent companies from using the 'Texas Two-Step' bankruptcy process to avoid lawsuit liabilities. J&J has twice attempted to use this tactic to resolve talc-related ovarian cancer claims.

The ECBA would treat such bankruptcy filings as bad faith and prohibit stays of litigation against non-bankrupt affiliates. Co-lead counsels Michelle Parfitt and Leigh O'Dell emphasize the legislation's importance in protecting justice and fairness. They highlight the financial devastation faced by victims, with average medical costs exceeding $220,000, while J&J earned over $83 billion in 2023.

The legislation has support from both Democratic and Republican lawmakers, who criticize the abuse of the bankruptcy system by wealthy corporations at the expense of harmed individuals. There are currently over 57,000 pending cases in the J&J Talcum Powder Products Liability Litigation.

Positive

• Bipartisan support for the Ending Corporate Bankruptcy Abuse Act (ECBA) to prevent misuse of bankruptcy laws
• Increased scrutiny and criticism of the 'Texas Two-Step' bankruptcy process by lawmakers and legal scholars
• Growing awareness and potential legislative action against corporate tactics to avoid lawsuit liabilities

Negative

• Johnson & Johnson (JNJ) faces over 57,000 pending talc-related ovarian cancer lawsuits
• Potential increased liability exposure for JNJ if the ECBA is passed, limiting bankruptcy options
• Negative public perception and criticism of JNJ's attempts to use the 'Texas Two-Step' bankruptcy process

Insights

Legal Expert

The proposed Ending Corporate Bankruptcy Abuse Act (ECBA) could significantly impact Johnson & Johnson's legal strategy in talc-related lawsuits. This legislation aims to close the 'Texas Two-Step' loophole, which J&J has twice attempted to use to resolve ovarian cancer claims. If passed, it would:

• Treat such bankruptcy filings as bad faith
• Prohibit stays of litigation against non-bankrupt affiliates
• Potentially expose J&J to full liability in the tort system

This development could lead to increased financial exposure for J&J, potentially impacting its $83 billion annual revenue. Investors should monitor the progress of this bill, as it could set a precedent for how large corporations manage mass tort liabilities.

Financial Analyst

The potential passage of the ECBA poses significant financial risks for Johnson & Johnson. With over 57,000 pending cases, the company faces substantial liability. The average medical cost per case of $220,000 suggests a potential total liability exceeding $12.5 billion. Without the bankruptcy option, J&J may need to::

• Increase legal reserves
• Consider large-scale settlements
• Potentially impact dividend policies or share buybacks

While J&J's $83 billion revenue provides a cushion, the market may reassess the company's risk profile, potentially affecting its valuation and stock price in the short to medium term.

Medical Research Analyst

The link between talc powder and ovarian cancer remains a critical medical and legal issue. Key points for investors:

• Asbestos contamination in talc is the primary concern
• Targeted marketing to specific demographics (African American, Hispanic, overweight women) raises ethical questions
• The 40,000 cases of ovarian cancer or mesothelioma linked to J&J products represent a significant public health issue

This situation could lead to increased scrutiny of J&J's product safety measures and marketing practices. Long-term, it may result in stricter regulations for cosmetic products, potentially impacting the entire industry's R&D and marketing strategies.

Bill in Congress would eliminate bankruptcy as a path for profitable companies to avoid liability claims

NEWARK, N.J.--(BUSINESS WIRE)-- The attorneys representing tens of thousands of women in their talc-related ovarian cancer lawsuits against Johnson & Johnson (NYSE:JNJ) are calling for passage of a measure in Congress that would end the ability of solvent companies to use the so-called Texas Two-Step bankruptcy process in order to avoid lawsuit liabilities.

The process involves taking a company’s liabilities – in this case, the thousands of talc-ovarian cancer lawsuits – placing them into a new company and then filing a petition aimed at resolving the cases in bankruptcy court rather than the tort system. Johnson & Johnson has twice tried and failed to use the Two-Step to resolve the ovarian cancer claims tied to its iconic Baby Powder.

Michelle Parfitt and Leigh O’Dell are co-lead counsel in multidistrict litigation in the cases before a federal court in New Jersey. Both support passage of the Ending Corporate Bankruptcy Abuse Act (ECBA), introduced in July 2024.

"This legislation is critical to protect the American system of justice, fairness, and the original intent of the bankruptcy laws," declared Ms. Parfitt, Senior Partner at the Ashcraft & Gerel law firm.

This bipartisan legislation, sponsored by Sens. Sheldon Whitehouse (D-R.I.) and Josh Hawley (R-Mo.), along with Reps. Emilia Sykes (D-Ohio) and Lance Gooden (R-Texas) would ensure that courts treat such bankruptcy filings as bad faith and prohibits stays of litigation against non-bankrupt affiliates involved in these maneuvers.

Ms. O'Dell highlighted the severe impact on women forced into personal bankruptcy due to exorbitant medical bills from ovarian cancer caused by Johnson & Johnson’s talc powder, which contains asbestos, one of the most poisonous substances on the planet.

“With average medical costs exceeding $220,000, these women face actual financial ruin while J&J, which earned over $83 billion in 2023, is trying for the third time to claim bankruptcy. This egregious tactic primarily targets African American, Hispanic, and overweight women, whom J&J aggressively targeted in advertising," said Ms. O'Dell, who practices in the Mass Tort Section at the Beasley Allen Law Firm.

After gaining initial momentum, the use of the Texas Two-Step is drawing increasing criticism from legal scholars and members of Congress:

“In this case, the company tried to use a legal scheme known as the ‘Texas Two-Step.’ It’s an accurate name because it would have allowed J&J to dance around its obligations to consumers it harmed. And this is not a few people we’re talking about: this case concerns nearly 40,000 Americans who used J&J products and have been diagnosed with ovarian cancer or mesothelioma.”
Sen. Richard Durbin (D-Ill.)

“Just like the Sacklers, who are using a legal loophole to escape accountability for their role in the opioid epidemic, Johnson & Johnson is blatantly abusing our bankruptcy system in a way that protects the wealthy and giant corporations and stiffs the ordinary Americans who they have harmed.”
Rep. Carolyn B. Maloney (D-N.Y.)

“For too long, corporations have used dirty backroom deals to shield themselves from liability for corporate misconduct. This bipartisan bill will put an end to it.”
Sen. Josh Hawley (R-Mo.)

Original sponsors and early supporters of the Texas legislation have made it clear that they did not intend for the Texas Two-Step to be used so corruptly and fraudulently. "As co-chairs of the MDL, we are very grateful to these courageous elected representatives who are standing up against the millions of dollars that J&J and other corrupt companies are using to influence officials and contaminate the rule of law and America’s system of fairness,” say Ms. Parfitt and Ms. O'Dell.

There are more than 57,000 pending cases in the Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation, in the United States District Court for the District of New Jersey, MDL No. 2738 (3:16-md-02738).

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813685928/en/

Mike Androvett

800-559-4534

mike@androvett.com

Source: Beasley Allen Law Firm

FAQ

What is the 'Texas Two-Step' bankruptcy process that Johnson & Johnson (JNJ) attempted to use?

The 'Texas Two-Step' is a process where a company transfers its liabilities to a new entity and then files for bankruptcy with that entity, aiming to resolve lawsuits in bankruptcy court rather than the tort system. JNJ tried to use this twice to handle talc-related ovarian cancer claims.

How many pending cases are there in the Johnson & Johnson (JNJ) Talcum Powder Products Liability Litigation?

There are more than 57,000 pending cases in the Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation in the United States District Court for the District of New Jersey.

What is the Ending Corporate Bankruptcy Abuse Act (ECBA) proposed in relation to Johnson & Johnson (JNJ)?

The ECBA is a bipartisan bill introduced in July 2024 that aims to prevent solvent companies like JNJ from using bankruptcy processes to avoid lawsuit liabilities. It would treat such filings as bad faith and prohibit stays of litigation against non-bankrupt affiliates.

How much did Johnson & Johnson (JNJ) earn in 2023 according to the press release?

According to the press release, Johnson & Johnson earned over $83 billion in 2023.