Women Cancer Victims Opposed to Johnson & Johnson's 'Texas Two-Step' Bankruptcy Ploy Urge Passage of Reforms Introduced by Warren, Durbin, Nadler, Blumenthal, and Maloney

Aug 04, 2021 10:45 AM ET

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More than 30,000 women cancer victims would retain their constitutional right to have juries decide if talc in Johnson & Johnson's baby products caused their ovarian cancer under bankruptcy reforms proposed Wednesday by key lawmakers in the U.S. Senate and House of Representatives.


The Nondebtor Release Prohibition Act of 2021 would close controversial bankruptcy loopholes, including non-consensual third-party releases and the so-called "Texas Two-Step." Recent media reports indicate that Johnson & Johnson – with a market cap of more than $400 billion – is contemplating bankruptcy to avoid paying claims and damages that would likely cost a fraction of that amount. In a quarterly earnings report issued this week, J&J announced sales of $23.31 billion, a 27 percent increase year over year, and upgraded its annual sales forecast to $94.6 billion.


"Many of us are shocked that Johnson & Johnson would consider abusing the bankruptcy process to avoid caring for the women and families they've harmed," says Deane Berg, whose 2013 trial resulted in the first jury verdict establishing a link between talcum powder and ovarian cancer. "Before we were harmed by J&J, we were loyal J&J customers. They've turned their back on all of us."


Dozens of studies published in peer-reviewed journals during the past 25 years have shown a statistically significant association between talc use and ovarian cancer and mesothelioma. Documents produced at trial show that the company was aware of the dangers as far back as the 1960s.


The bankruptcy reform proposal introduced by Sen. Elizabeth Warren (D-Mass.), Sen. Richard Durbin (D-Ill.) and Sen. Richard Blumenthal (D-Conn.) in the Senate, and Rep. Jerrold Nadler (D-N.Y.) and Rep. Carolyn Maloney (D-N.Y.) in the House, would address a growing trend in which a profitable company is able to quickly corral legal liabilities and debts into a separate corporate entity. Known as a "divisive merger" or the "Texas Two-Step," the liability-laden subsidiary is then reincorporated elsewhere and eventually declared bankrupt. The threat of bankruptcy is used to intimidate individuals who file lawsuits and to drive down the value of negotiated settlements.


"These conscientious and well-informed lawmakers recognize that allowing highly profitable companies to shirk their responsibilities to society is reprehensible and can't be tolerated," says Andy Birchfield, Mass Tort Section Head at the Beasley Allen Law Firm, which represents thousands of women diagnosed with ovarian cancer after exposure to Johnson & Johnson Baby Powder and other talc-based products. "The courts – not the federal bankruptcy system – are the proper forum for resolving disputes between wrongdoers and the people they injure."


The Nondebtor Release Prohibition Act would prohibit bankruptcy judges from allowing companies that are not a party to gain non-consensual releases of liability as part of the bankruptcy process. This tactic allows corporations to employ bankruptcy as a shield against liability. The legislation aligns with other proposed legislation – dubbed the SACKLER Act – introduced by Rep. Maloney.


In addition, bankruptcy filings often result in indefinite delays that freeze ongoing lawsuits in state and federal courts. Sen. Warren's bill would limit stays for a duration of only 90 days.


"These legislators should be applauded for recognizing the need to close the loopholes that allow powerful individuals and successful corporations to play blame-shifting with people's lives," says Michelle Parfitt, co-lead counsel in the federal talc MDL and a senior partner in the law firm Ashcraft & Gerel. "Whether it's a baby powder, a pharmaceutical or any other dangerous product, consumers need to be able to gain adequate compensation for any losses and injuries they've suffered. Without these proposals, that fundamental tenet of our justice system is at risk."


About the Beasley Allen Law Firm
Headquartered in Montgomery, AlabamaBeasley Allen is comprised of more than 70 attorneys and 200 support staff. One of the largest Plaintiffs law firms in the country, Beasley Allen is a national leader in civil litigation, with verdicts and settlements of more than $26 billion. For more information visit www.beasleyallen.com.


About the Ashcraft & Gerel Law Firm
Washington, D.C.-based Ashcraft & Gerel, LLP was first developed in 1953. The goal of the law firm is to help those who have been injured while on the job. Since its founding, this law firm has become one of the largest and most well-known personal injury firms in the U.S.


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