A Johnson & Johnson official testifying Wednesday in defense of its strategy to move litigation over its talc-based products to bankruptcy court indicated the company could increase a $2 billion settlement offer if the chapter 11 case is allowed to continue, WSJ Pro Bankruptcy reported. “The $2 billion is not the only thing, $2 billion is a start,” said John Kim, chief legal officer of bankrupt LTL Management LLC, the J&J subsidiary responsible for the talc litigation. He said the settlement offer “is just the beginning of the funding” and that, under an agreement with the subsidiary, J&J could increase its offer to reach an agreement in chapter 11 with injury claimants. “We hope to have a mediation, to come to a consensus and a plan, to get the appropriate amount put in to resolve these cases,” Mr. Kim testified during the third day of trial in the U.S. Bankruptcy Court in Trenton, N.J. Judge Michael Kaplan is considering injury claimants’ request to dismiss the J&J subsidiary from chapter 11 on the grounds that the bankruptcy was filed in bad faith to gain an unfair litigation advantage. J&J and its subsidiary have denied the allegation and said bankruptcy will provide plaintiffs a fairer forum for quickly resolving about 38,000 talc-injury lawsuits as well as future claims. Read more.
In related news, Johnson & Johnson’s “perverse incentive” have tainted the company’s strategy to use bankruptcy to force a negotiated end to more than 38,000 lawsuits claiming the consumer giant’s iconic baby powder caused cancer, a restructuring expert testified in court yesterday, Bloomberg News reported. The company is using the chapter 11 case of a small unit J&J created last year to resolve billions of dollars in legal claims without facing any of the stigma or court restrictions of filing for bankruptcy itself, said Saul Burian, a managing director at investment bank Houlihan Lokey Howard & Zukin Inc. Burian has worked on some of the most recognized bankruptcy cases in recent decades, including Sears, Toys ‘R’ Us and Lehman Brothers. The baby powder lawsuits have been halted while the unit, LTL Management, seeks to settle all current and future claims. That gives J&J the upper hand because it can delay while cancer victims die, Burian said. “You have this perverse incentive where J&J can throw up their hands and say, ‘When you’re ready to settle, let me know,’” Burian told the federal judge overseeing the bankruptcy in Trenton, New Jersey, about 30 minutes away from J&J’s sprawling headquarters in New Brunswick. Johnson & Johnson denied that the talc in its baby powder causes cancer and that it is abusing the bankruptcy system by putting LTL into chapter 11. Read more.
