Johnson & Johnson 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, Bloomberg News reported. 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 that it 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.
