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Johnson & Johnson Will Try to File for Bankruptcy for a Third Time

Published: November 10, 2023

Johnson & Johnson may try to file bankruptcy for a third time to address its talc liabilities. The company has failed twice before but is looking again to file for bankruptcy under a different corporate structure. There are around 51,000 lawsuits claiming that people who used Johnson & Johnson’s talc-based products now have cancer because of them. Two Chapter 11 bankruptcy filings filed by its subsidiary LTL Management were both denied because the judge found that LTL did not qualify for bankruptcy protection because it was not in financial distress.

What Johnson & Johnson tried to do is called the Texas Two-Step. A company facing lawsuits will transfer its legal liabilities to a subsidiary and then start bankruptcy proceedings for the subsidiary. This protects the main company by separating its liabilities from its assets. J&J is now planning on a third bankruptcy filing according to the Wall Street Journal. To move the filing to a Texas Court, Johnson & Johnson has to involve one of its businesses that is already operating there to establish a venue. Johnson and Johnson recently stated that it would put a settlement offer to a vote amongst ovarian cancer patients who claim their use of Johnson & Johnson baby powder caused their illness.

A report by Reuters found that Johnson and Johnson knew its talc products were contaminated with asbestos for decades. Different lab tests found asbestos in Johnson and Johnson’s talc from 1971 to the early 2000s, but Johnson and Johnson failed to report any of the findings to the U.S. Food and Drug Administration. In 2019, the FDA found asbestos in a bottle of Johnson’s baby powder, leading to a recall of 33,000 bottles. The company stopped selling talc-based baby powder in the United States and Canada the following year but continued to sell them worldwide. It finally stopped selling all talc-containing products this year. It still sells cornstarch-based baby powder.

Talc is one of the softest minerals on earth. It is used in many different products like paints, ceramics, and construction materials. It is also found in cosmetic products. Asbestos can be present in many talc deposits, so when talc is mined, it contaminates the resulting talc. Asbestos is a toxic mineral and causes mesothelioma, lung cancer, and ovarian cancer.

Andrew Scurria, “Johnson & Johnson Considers Ditching Texas Two-Step for Third Talc Bankruptcy” Wall Street Journal (October 20, 2023). [Link]
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