Jump to content

The Texas Two-Step: Johnson&Johnson Declares Bankruptcy


pacman

Recommended Posts

24 minutes ago, RollLeft said:

180?

Well, actually, the article complained about things that are standard bankruptcy:  the stay of litigation, the loss of ability to have a jury trial (in most instances) and some form of limitation on liability (really, the inability to have a jury trial in state court is probably one of the biggest limitations on liability).

It didn't focus on the DEGREE of limitation of liability that the "two-step" may implicate.

Also, @Rudiger or @Dahobbs, I know there's no "means test" on an individual debtor in Chapter 11, is there anything that operates to dismiss a bankruptcy if liabilities can be paid out of operating income in the ordinary course?

Edited by TwiceHorn
Link to comment
Share on other sites

9 minutes ago, Hank Scorpio said:

Just rename this thread to “Twicehorn showing his ass” 

The long and short of it is that plaintiffs, whether injury or otherwise, have been getting horsefucked by bankruptcy for as long as there's been a bankruptcy code.  It sucks and the defendant debtor may be a piece of shit.  But them's the breaks.  We have a bankruptcy code for mostly good reasons.

Re-reading that article, it's kind of shitty.  It complains about general bankruptcy features without really specifically identifying the problem with the Texas Two Step and what it means for injury plaintiffs.

Link to comment
Share on other sites

12 hours ago, Rudiger said:

If the market value of J&J is $400B, or even half that, or even one-tenth of that, the market value number has already accounted for secured debt that would have priority over the talc claimants in a bankruptcy.

are you using market value to mean total asset value? 

Link to comment
Share on other sites

I’m using market value to mean market capitalization, but we could substitute book value and the point would remain the same. 
What do bankruptcy courts use to determine value? Market cap is outstanding shares times current market price whereas book value is assets minus liabilities. There's another measure, enterprise value, which is market cap + debt - cash.

I would think market cap and enterprise value aren't useful in determining amount of actual compensation available to disburse.
Link to comment
Share on other sites

Just now, gsoda3 said:

What do bankruptcy courts use to determine value? Market cap is outstanding shares times current market price whereas book value is assets minus liabilities. There's another measure, enterprise value, which is market cap + debt - cash.

I would think market cap and enterprise value aren't useful in determining amount of actual compensation available to disburse.

I'm sure it's the topic of heated debate, but yeah, market cap don't make no sense because that money is not generally available to the corporation.

The other salient point that the NPR article left out, although it kind of sniffed around it, J/J apparently capitalized the "quato" with $2B, which is a tiny fraction of their liquidation value, which is at least in the double digit billions.  So, they tried to limit their liability to less than about 10% of their current value.

Also, @Rudiger, is there something akin to the "means test" that is applied to dismiss a Ch. 11, when the debtor can pay liabilities from current operations?  Or is it all just "bad faith" filing?

Link to comment
Share on other sites

15 minutes ago, gsoda3 said:

What do bankruptcy courts use to determine value? Market cap is outstanding shares times current market price whereas book value is assets minus liabilities. There's another measure, enterprise value, which is market cap + debt - cash.

I would think market cap and enterprise value aren't useful in determining amount of actual compensation available to disburse.

It might be depending on the circumstances. Conceptually, the market value of a company should also be its liquidation value of you were to sell the whole thing in one piece. But honestly, this isn't usually going to come up in bankruptcy because entities going into bankruptcy generally have very reduced market values such that piecemeal selling of assets generally produces better value than selling stock. This is part of the reason of why J&J's situation is so unique. 

Link to comment
Share on other sites

2 minutes ago, TwiceHorn said:

I'm sure it's the topic of heated debate, but yeah, market cap don't make no sense because that money is not generally available to the corporation.

The other salient point that the NPR article left out, although it kind of sniffed around it, J/J apparently capitalized the "quato" with $2B, which is a tiny fraction of their liquidation value, which is at least in the double digit billions.  So, they tried to limit their liability to less than about 10% of their current value.

Also, @Rudiger, is there something akin to the "means test" that is applied to dismiss a Ch. 11, when the debtor can pay liabilities from current operations?  Or is it all just "bad faith" filing?

You don't really have a means test. But courts can dismiss for cause, including bad faith when the petition serves no valid bankruptcy purpose. 

https://casetext.com/case/in-re-integrated-telecom-express-inc-3

Quote

The issue on appeal is whether, on the facts of this case, a Chapter 11 petition filed by a financially healthy debtor, with no intention of reorganizing or liquidating as a going concern, with no reasonable expectation that Chapter 11 proceedings will maximize the value of the debtor's estate for creditors, and solely to take advantage of a provision in the Bankruptcy Code that limits claims on long-term leases, complies with the requirements of the Bankruptcy Code. We conclude that such a petition is not filed in good faith and will therefore reverse.

 

  • Hook 'Em 1
Link to comment
Share on other sites

16 minutes ago, Dahobbs said:

It might be depending on the circumstances. Conceptually, the market value of a company should also be its liquidation value of you were to sell the whole thing in one piece. But honestly, this isn't usually going to come up in bankruptcy because entities going into bankruptcy generally have very reduced market values such that piecemeal selling of assets generally produces better value than selling stock. This is part of the reason of why J&J's situation is so unique. 

Not to mention how stock values have become so generally untethered to a realistic value of the corporation, even as a going concern.  Although J/J's P/E has hovered around the standard 20 for a while now.

And, I guess the liquidation value of a company in bankruptcy really only comes up as a theoretical matter in the mass tort situation like this.  If it's an actual liquidation, no one cares and the liquidation value is whatever the assets bring, subject to bitching about whether the "sale price" is good enough.

 

Edited by TwiceHorn
Link to comment
Share on other sites

@TwiceHorn I have lots of thoughts about this as it is sucking up a tremendous amount of my day right now so I'll give the short version.

The short version is that there is a particular group of lawyers who have found a way to subvert the intent of Section 524(g) and the Bankruptcy Code in general, by using the Texas Two Step method.  

First, the Texas divisive merger statute is not by itself problematic.  It should be noted however, that the statute was never intended to allow the divisive merger to result in defrauding creditors.

Second, 524(g) was intended to allow asbestos victims and the manufacturers of the products that would kill them come to an accord that would be blessed by the BK courts and therefore stand up to public scrutiny.  The idea was there was not enough money to pay everyone (hang onto this idea for a moment, as we will get back to it) who deserved it, so we'd take a finite amount of money from the Creditor, put it into a trust then spread it out evenly.  That's bedrock backline bk law, applied to the unique situation of asbestos.

What has happened with the LTL (that's what J&J called their spin off - it stands for "Legacy Talc Liabilities" - so, so clever), is that they used the former to subvert the later.  There is no limit to the funds here.  J&J has over $400B market cap.  Their credit rating is better than that of the US Government.  So there is no funding problem here.  They simply find it inconvenient to deal with plaintiffs cases.  So they chose to check out of the civil justice system, and enter the bankruptcy system through a clever contrivance.  

I know it sounds hyperbolic, but if it isn't stopped, it'll be the bankruptcy case that swallowed the tort system.  There is nothing to stop other liable companies from spinning off their liabilities into a shell, putting that shell into bankruptcy and then whistling as plaintiffs hold the bag. 

This is just the tip of the iceberg.  I wanted to drop into this thread since Twice had name checked me.  There's a ton more nuance.  Until then, see you at the 3rd Circuit!

  • Hook 'Em 5
  • Like 1
Link to comment
Share on other sites

14 minutes ago, Chad Fuck said:

@TwiceHorn I have lots of thoughts about this as it is sucking up a tremendous amount of my day right now so I'll give the short version.

The short version is that there is a particular group of lawyers who have found a way to subvert the intent of Section 524(g) and the Bankruptcy Code in general, by using the Texas Two Step method.  

First, the Texas divisive merger statute is not by itself problematic.  It should be noted however, that the statute was never intended to allow the divisive merger to result in defrauding creditors.

Second, 524(g) was intended to allow asbestos victims and the manufacturers of the products that would kill them come to an accord that would be blessed by the BK courts and therefore stand up to public scrutiny.  The idea was there was not enough money to pay everyone (hang onto this idea for a moment, as we will get back to it) who deserved it, so we'd take a finite amount of money from the Creditor, put it into a trust then spread it out evenly.  That's bedrock backline bk law, applied to the unique situation of asbestos.

What has happened with the LTL (that's what J&J called their spin off - it stands for "Legacy Talc Liabilities" - so, so clever), is that they used the former to subvert the later.  There is no limit to the funds here.  J&J has over $400B market cap.  Their credit rating is better than that of the US Government.  So there is no funding problem here.  They simply find it inconvenient to deal with plaintiffs cases.  So they chose to check out of the civil justice system, and enter the bankruptcy system through a clever contrivance.  

I know it sounds hyperbolic, but if it isn't stopped, it'll be the bankruptcy case that swallowed the tort system.  There is nothing to stop other liable companies from spinning off their liabilities into a shell, putting that shell into bankruptcy and then whistling as plaintiffs hold the bag. 

This is just the tip of the iceberg.  I wanted to drop into this thread since Twice had name checked me.  There's a ton more nuance.  Until then, see you at the 3rd Circuit!

Good stuff, thanks.

For the peanut gallery, 524(g) is the provision we have been discussing implicitly where a trust or pool of money is set aside during a bankruptcy from which all tort claims arising out of a particular set of torts are paid.  It was enacted in the wake of the Johns-Manville asbestos bankruptcy and is most often used for asbestosis/mesothelioma claims, but is not limited to them.  It happens that the J/J deal is also an asbestos case.

Bankruptcy is a bit of a fuckjob for plaintiffs in mass tort cases, regardless.  This, though, is something else entirely.

Like SB 8, it seems too clever by half,

Who is this group of lawyers? It's public record, so might as well name names.  I see Jones Day has a conflict problem in the BK, but I don't know that they are the perps.

Edited by TwiceHorn
Link to comment
Share on other sites

1 hour ago, Dahobbs said:

It might be depending on the circumstances. Conceptually, the market value of a company should also be its liquidation value of you were to sell the whole thing in one piece. But honestly, this isn't usually going to come up in bankruptcy because entities going into bankruptcy generally have very reduced market values such that piecemeal selling of assets generally produces better value than selling stock. This is part of the reason of why J&J's situation is so unique. 

i've never been able to understand the intricacies of bankruptcies.  from my pov on the trading desk they don't make sense.  often they trade well below book value but other times they trade well above.  even after considering the nuances of senior secured debt or other unique liabilities there doesn't seem to be a standard pattern.

Link to comment
Share on other sites

17 minutes ago, gsoda3 said:

i've never been able to understand the intricacies of bankruptcies.  from my pov on the trading desk they don't make sense.  often they trade well below book value but other times they trade well above.  even after considering the nuances of senior secured debt or other unique liabilities there doesn't seem to be a standard pattern.

Well, the market value of a company in bankruptcy is going to depend on a lot of factors that really have nothing to do with bankruptcy law (e.g., investor expectations on the entity after bankruptcy). From a trading perspective, it is even more complicated even in a Chapter 11 reorganization where the entity survives post bankruptcy. First, Shareholders are a form of creditor, but they are at the bottom of the list. Second, even though the entity survives, the existing shares are subject to be completely cancelled and new shares issued. Thus existing shareholder value can be completely wiped out even if the new shares of the company after bankruptcy have substantial market value. The old shares are going to have limited value when trading if that's what you expect to happen. The whole point being that there is going to be a lot of variability due to those unknowns. 

  • Hook 'Em 1
Link to comment
Share on other sites

1 hour ago, TwiceHorn said:

Good stuff, thanks.

For the peanut gallery, 524(g) is the provision we have been discussing implicitly where a trust or pool of money is set aside during a bankruptcy from which all tort claims arising out of a particular set of torts are paid.  It was enacted in the wake of the Johns-Manville asbestos bankruptcy and is most often used for asbestosis/mesothelioma claims, but is not limited to them.  It happens that the J/J deal is also an asbestos case.

Bankruptcy is a bit of a fuckjob for plaintiffs in mass tort cases, regardless.  This, though, is something else entirely.

Like SB 8, it seems too clever by half,

Who is this group of lawyers? It's public record, so might as well name names.  I see Jones Day has a conflict problem in the BK, but I don't know that they are the perps.

Are you aware of a 524(g) case that wasn't asbestos?  Serious question, because I only ever see them in an asbestos context. 

If you want to know who the lawyers are, look at Garlock, Specialty Products (Bondex), Bestwall (Georgia Pacific), Aldrich/Murray Boiler (Ingersol-Rand/Trane), and DBMP (Certainteed).  You'll see it's the same players on Debtors' side every time.  None of the last three have any business being in bankruptcy.  Same play pulled by the same people.  There's a reason why they're all (but for Specialty Product) filed in NC.  Overworked bankruptcy bench and 4th Circuit law for proving bad faith bankruptcy filing is essentially insurmountable.  LTL was filed in NC but got booted to NJ.  

  • Hook 'Em 3
Link to comment
Share on other sites

21 minutes ago, Dahobbs said:

Well, the market value of a company in bankruptcy is going to depend on a lot of factors that really have nothing to do with bankruptcy law (e.g., investor expectations on the entity after bankruptcy). From a trading perspective, it is even more complicated even in a Chapter 11 reorganization where the entity survives post bankruptcy. First, Shareholders are a form of creditor, but they are at the bottom of the list. Second, even though the entity survives, the existing shares are subject to be completely cancelled and new shares issued. Thus existing shareholder value can be completely wiped out even if the new shares of the company after bankruptcy have substantial market value. The old shares are going to have limited value when trading if that's what you expect to happen. The whole point being that there is going to be a lot of variability due to those unknowns. 

that's a good summary.  one of the wackiest bankruptcies in recent memory was hertz last year where you actually saw the whiplash occur when expectations went from ...

...shares are going to zero (even if they sell the fleet there's no cash left over and no one's renting cars in a pandemic) to...

...liquidation value is now positive (post-covid travel resurgence coupled with used car values going through the roof) but hertz isn't allowed to issue new shares to...

...hertz is re-emerging from bk AND existing shareholders are getting new shares and warrants.  

  • Hook 'Em 1
Link to comment
Share on other sites

45 minutes ago, gsoda3 said:

that's a good summary.  one of the wackiest bankruptcies in recent memory was hertz last year where you actually saw the whiplash occur when expectations went from ...

...shares are going to zero (even if they sell the fleet there's no cash left over and no one's renting cars in a pandemic) to...

...liquidation value is now positive (post-covid travel resurgence coupled with used car values going through the roof) because Hertz is a meme stonk on reddit and rube wsb retail traders are pumping it, but hertz isn't allowed to issue new shares to...

...hertz is re-emerging from bk AND existing shareholders are getting new shares and warrants.  

FIFY

Link to comment
Share on other sites

1 hour ago, Chad Fuck said:

Are you aware of a 524(g) case that wasn't asbestos?  Serious question, because I only ever see them in an asbestos context. 

If you want to know who the lawyers are, look at Garlock, Specialty Products (Bondex), Bestwall (Georgia Pacific), Aldrich/Murray Boiler (Ingersol-Rand/Trane), and DBMP (Certainteed).  You'll see it's the same players on Debtors' side every time.  None of the last three have any business being in bankruptcy.  Same play pulled by the same people.  There's a reason why they're all (but for Specialty Product) filed in NC.  Overworked bankruptcy bench and 4th Circuit law for proving bad faith bankruptcy filing is essentially insurmountable.  LTL was filed in NC but got booted to NJ.  

No, I'm not.  First read, I missed the phrase that limits it to asbestos claims.

Thanks for the insight on WD NC.  That question had arisen before.

I'll go ahead and "name names."

Jones Day
Gregory M. Gordon
Daniel B. Prieto
2727 North Harwood Street, Suite 500
Dalllas, TX 75201
Tel: (214) 220-3939
Fax: (214) 969-5100

I was curious if it was Texas lawyers that knew of the divisive merger wrinkle or bankruptcy lawyers elsewhere that discovered that feature of Texas law.  Besides being a sweatshop, and sort of a general enabler of corporate malfeasance (nothing special among biglaw), I had never really considered Jones Day to be super-evil.  The evidence to the contrary is mounting.

Edited by TwiceHorn
Link to comment
Share on other sites

J&J was founded in 1886. It has literally saved millions of lives and has had an enormously positive influence on the US economy. I would have been sad to see the company disappear and have so many employees and vendors lose their jobs. I wish there was a better system to manage verdicts. BTW, my grandfather died from cancer in his lungs of unknown origin but he used the shit out of talcum powder.  I wonder if he would be eligible for relief despite no autopsy and despite lack of proof that he used the shit out of talcum powder.

Link to comment
Share on other sites

3 minutes ago, Bevo said:

J&J was founded in 1886. It has literally saved millions of lives and has had an enormously positive influence on the US economy. I would have been sad to see the company disappear and have so many employees and vendors lose their jobs. I wish there was a better system to manage verdicts. BTW, my grandfather died from cancer in his lungs of unknown origin but he used the shit out of talcum powder.  I wonder if he would be eligible for relief despite no autopsy and despite lack of proof that he used the shit out of talcum powder.

There is no risk of J&J disappearing. If that is what you've taken from this thread then you've completely missed the point. It is abusing the law to avoid having to pay money to people it has hurt. That's all that is happening here. Feeling sympathy for J&J in this thread is completely inappropriate. 

Edited by Dahobbs
  • Hook 'Em 4
Link to comment
Share on other sites

18 minutes ago, Dahobbs said:

There is no risk of J&J disappearing. If that is what you've taken from this thread then you've completely missed the point. It is abusing the law to avoid having to pay money to people it has hurt. That's all that is happening here. Feeling sympathy for J&J in this thread is completely inappropriate. 

I'm just speaking in generalities, but from the title I thought the law was just for Texas filings. Is this for filings worldwide?

Link to comment
Share on other sites

1 minute ago, Bevo said:

I'm just speaking in generalities, but from the title I thought the law was just for Texas filings. Is this for filings worldwide?

Not worldwide, in the US.

The name comes from the peculiarity of Texas corporate law that permits a corporation to merge/divest itself of assets and liabilities into a second corporate entity, by "fiat," without having to expressly assign those assets and liabilities to the second entity.

The second entity then petitions for bankruptcy and the amount available to its creditors is limited to those assets it was given when it was "spawned."

In other states, apparently, a corporation would have to form the separate entity, and then "capitalize" it  with assets and liabilities by contract/assignment.  When done in the face of a substantial debt to hinder or delay creditors, those transactions would be challenged and reversed as to the assignor, i.e. as fraudulent transfers.  When the second entity petitions for bankruptcy, then, it would have neither assets nor liabilities and the petition then would be dismissed, presumably, after the transfers were found to be fraudulent.

 

Link to comment
Share on other sites

On 4/3/2022 at 1:11 PM, Captainant said:

I more meant gaining the privilege of changing your debts after incurring them without the consent of your creditors, not just merely the "LL" part of LLC. Seems ripe for abuse by cynical business interests that don't want to pay for their own fuckups and real damages (read: cancer) against actual physical people. 

[snip]

Liquidation and failure is the table stakes for our capitalistic system, can't have it both ways. Unless you're too big fail I guess.

These are the big questions in my opinion.

1) If I have a business relationship or a consumer/supplier relationship with business A how can it be a good thing for Business A to assign liabilities to newly formed Business B and then not set them up to pay those liabilities?

  • Is this ok to get around paying invoices?
  • Avoid paying IP license fees?
  • Get out of paying for damage to a city in the case of a chemical plant explosion?
  • Or just when the damages have been realized (cancer) but the amounts have not yet been determined?

2) The whole "Too Big to Fail" thing has created problems that are meant to be dealt with by capitalist Darwinism. If companies trade in unsound securities, sell unsafe products, or blow up a town then maybe they should fail and someone can come in a do a better job with those lessons learned.  Should we have bailed out Enron?  Why Goldman Sachs and not Enron?  Better lobbyists?

Link to comment
Share on other sites

2 hours ago, Bevo said:

J&J was founded in 1886. It has literally saved millions of lives and has had an enormously positive influence on the US economy. I would have been sad to see the company disappear and have so many employees and vendors lose their jobs. I wish there was a better system to manage verdicts. BTW, my grandfather died from cancer in his lungs of unknown origin but he used the shit out of talcum powder.  I wonder if he would be eligible for relief despite no autopsy and despite lack of proof that he used the shit out of talcum powder.

J&J knew its talc products had asbestos in it.  It knew that asbestos killed people.  It overtly hid this information from any government enforcement agencies, from the public, and still lies about its asbestos containing talc today.  It is a lying company that killed people.

The way to manage verdicts is not to kill people with your products.

I'm sorry about your grandfather's death.  But you say there is no proof "he used the shit" out of talcum powder.  If that's true, then how do you know?  

 

Edited by Chad Fuck
  • Hook 'Em 1
Link to comment
Share on other sites

On 4/2/2022 at 11:32 PM, TwiceHorn said:

@Chad Fuck is probably the authority round here on the intersection of mass torts and bankruptcy. 

I'm just proud to be part of a community in which our resident "authority... on the intersection of mass torts and bankruptcy" is someone named "Chad Fuck". 

Carry on, law dogs...

  • Hook 'Em 1
  • Haha 4
Link to comment
Share on other sites

19 minutes ago, TexasEd said:

These are the big questions in my opinion.

1) If I have a business relationship or a consumer/supplier relationship with business A how can it be a good thing for Business A to assign liabilities to newly formed Business B and then not set them up to pay those liabilities?

  • Is this ok to get around paying invoices?
  • Avoid paying IP license fees?
  • Get out of paying for damage to a city in the case of a chemical plant explosion?
  • Or just when the damages have been realized (cancer) but the amounts have not yet been determined?

2) The whole "Too Big to Fail" thing has created problems that are meant to be dealt with by capitalist Darwinism. If companies trade in unsound securities, sell unsafe products, or blow up a town then maybe they should fail and someone can come in a do a better job with those lessons learned.  Should we have bailed out Enron?  Why Goldman Sachs and not Enron?  Better lobbyists?

Longhornmatt above kind of outlined the corporate advantages of this, outside the context of bankruptcy.

And Chad Fuck indicates that it didn't have any nefarious purpose.

But, as you point out, it seems really easy to use this provision to separate liabilities from assets with which to pay them (and the usual safeguards, to include consent of the obligee to the assignment), which is basically what's going on here.

Also, there's some language in the statute that seems to make the parent entity "secondarily liable" or a "guarantor" of any liability "allocated" to a new entity as the result of a "merger."  The language is a bit of a mishmash and it might not apply if the parent is a non-Texas entity.

Edited by TwiceHorn
Link to comment
Share on other sites

2 hours ago, Dahobbs said:

There is no risk of J&J disappearing. If that is what you've taken from this thread then you've completely missed the point. It is abusing the law to avoid having to pay money to people it has hurt. That's all that is happening here. Feeling sympathy for J&J in this thread is completely inappropriate. 

Feeling sympathy for employees of J&J that may lose their jobs despite having nothing to do with wrong doing != Feeling sympathy for J&J the corporation

Link to comment
Share on other sites

7 minutes ago, Ag with kids said:

Feeling sympathy for employees of J&J that may lose their jobs despite having nothing to do with wrong doing != Feeling sympathy for J&J the corporation

The employees of J&J needn't have any such fears.  There was never any chance of them losing their jobs.  The only ones losing here are the plaintiffs who were injured by J&J's asbestos containing talc-products.  That's it.  That's the bottom line.

The continuum you mention, current company/employees potentially losing a source of employment/profits for the sins of the companies past damages to others, is always at play in Bankruptcy.  Everyone has to take a hair cut because no one can be made whole - the company has to pay something  but not all they owe.  The plaintiffs may not get everything they deserve, but they get something.  The current operations continue.  We hold our noses and make the deal.

But J&J would never have to make this deal.  The numbers TwiceHorn posted upthread are numbers exaggerated by J&J to plead their case.  They aren't even in the remotest sense accurate. It is taking an absolute worst case scenario of very high outlier verdicts and saying, "every single case will be this way." J&J could pay these cases at trial for infinity and never be in danger of insolvency.  They just don't want to.

Edited by Chad Fuck
  • Hook 'Em 2
Link to comment
Share on other sites

Another article

https://www.reuters.com/business/healthcare-pharmaceuticals/inside-jjs-secret-plan-cap-litigation-payouts-cancer-victims-2022-02-04/

 

Quote

“It is critical that any activities related to Project Plato, including the mere fact the project exists, be kept in strict confidence,” Chris Andrew, a J&J lawyer, wrote in an internal memo reviewed by Reuters.

The covert team would go on to evaluate a strategy to shift all the liability from about 38,000 pending talc cases onto a newly created subsidiary, which would immediately declare bankruptcy. The goal, as a lawyer for the subsidiary said in a court filing: To halt all the litigation and transfer the cases to bankruptcy court, where plaintiffs would compete for compensation from a limited pool of money.

In court and in public statements last July, J&J (JNJ.N) said it intended to keep fighting the allegations that its products were unsafe in trial courts. The company was actively defending itself in talc trials, including one that would result in a $27 million jury award that could be nullified by the bankruptcy maneuver. The plaintiff in that case now may have to instead seek compensation through a bankruptcy process.

Privately, J&J took concrete steps starting as early as April to consider and plan the bankruptcy maneuver, according to internal company documents, depositions and other court records reviewed by Reuters. The strategy seeks to ensure the pending cases never reach a jury and instead be handled in a bankruptcy court.

Quote

Now, J&J proposes to give the subsidiary in bankruptcy $2 billion to put into a trust to compensate all 38,000 current plaintiffs, as well as all future claimants. J&J has said in court filings and in public statements that the subsidiary, LTL Management LLC, could also tap a stream of royalty revenues valued at more than $350 million at the time of the bankruptcy filing.

 

Link to comment
Share on other sites

47 minutes ago, wildcat09 said:

You say that like it's a bad thing.

For the record, I set out a scenario in which an entity might legitimately file Chapter 11 in a mass tort scenario, based on the J/J scenario and pretty explicitly excluding the "two step" aspect of it.

I didn't say it was right, or the right thing to do.  It was for discussion purposes.

And the discussion pretty quickly exposed the problems of the two-step, divisive merger aspect of it, which turns the "minor" horsefucking of a Chapter 11 that applies to virtually all unsecured creditors into a "major" horsefucking of tort claimants in particular.  Tort claimants tend to suffer more through bankruptcy because they didn't consensually create the liability, unlike stupid fucking lenders.

  • Hook 'Em 1
Link to comment
Share on other sites

3 minutes ago, Chad Fuck said:

The employees of J&J needn't have any such fears.  There was never any chance of them losing their jobs.  The only ones losing here are the plaintiffs who were injured by J&J's asbestos containing talc-products.  That's it.  That's the bottom line.

The continuum you mention, current company/employees potentially losing a source of employment/profits for the sins of the companies past damages to others, is always at play in Bankruptcy.  Everyone has to take a hair cut because no one can be made whole - the company has to pay something  but not all they owe.  The plaintiffs may not get everything they deserve, but they get something.  The current operations continue.  We hold our noses and make the deal.

But J&J would never have to make this deal.  The numbers TwiceHorn posted upthread are numbers exaggerated by J&J to plead their case.  They aren't even in the remotest sense accurate. It is taking an absolute worst case scenario of very high outlier verdicts and saying, "every single case will be this way." J&J could pay these cases at trial for infinity and never be in danger of insolvency.  They just don't want to.

Also for the record, I just pulled those numbers from various sources on the intergoogles, including their annual report and a number of plaintiff's lawyers sites, which may have exaggerated the amounts of recoveries to attract clients.

Link to comment
Share on other sites

1 minute ago, TwiceHorn said:

Also for the record, I just pulled those numbers from various sources on the intergoogles, including their annual report and a number of plaintiff's lawyers sites, which may have exaggerated the amounts of recoveries to attract clients.

I understand you quoted them for discussion.  I wasn't calling you out for their veracity and didn't mean to imply that. 

Each side must argue the facts to their advantage.  But J&J blew it up to "the sky is falling!" which it had to do to prevent getting dismissed.  That's where those numbers came from.  Unfortunately, the Court bit off on it.  If any case should ever have been dismissed, it should have been this one.  We'll see what the 3rd Circuit says if they choose to take it.  

  • Hook 'Em 2
Link to comment
Share on other sites

24 minutes ago, TexasEd said:

To halt all the litigation and transfer the cases to bankruptcy court, where plaintiffs would compete for compensation from a limited pool of money.

That's what happens in every bankruptcy.  That's the relatively minor horsefucking.  This aspect of it shouldn't be reported as anything unique to the Texas two step.  Any lawdog that has any kind of litigation practice has probably dealt with this kind of horsefucking, in many cases reducing a good case into effectively zero recovery.  And probably a lot of business people, too.

24 minutes ago, TexasEd said:

Now, J&J proposes to give the subsidiary in bankruptcy $2 billion to put into a trust to compensate all 38,000 current plaintiffs, as well as all future claimants

This is where it gets really fucked up and turns into a major horsefucking.  I'm kind of surprised they'd have the audacity to just throw $2B in there, instead of five or 10, at least.  Not even a reach-around.

And, if J/J is going to contend that that is a good-faith amount to settle all of the existing and future claims, that pretty seriously undercuts any claim that it's a big deal, as they had net earnings of $14B in 2020, and distributed $10B of that in dividends.

Edited by TwiceHorn
Link to comment
Share on other sites

4 minutes ago, Chad Fuck said:

I understand you quoted them for discussion.  I wasn't calling you out for their veracity and didn't mean to imply that. 

Each side must argue the facts to their advantage.  But J&J blew it up to "the sky is falling!" which it had to do to prevent getting dismissed.  That's where those numbers came from.  Unfortunately, the Court bit off on it.  If any case should ever have been dismissed, it should have been this one.  We'll see what the 3rd Circuit says if they choose to take it.  

I know.  Just thought I'd clarify since others have accused me of such things.

Appreciate your coming into it and explaining things.  I see there is a bill pending in Congress to amend the Code to make this less feasible.  

Edited by TwiceHorn
  • Hook 'Em 1
Link to comment
Share on other sites

Water is wet and all but jesus fuck with all the lawyers on this site.

 

I'm only interjecting to observe that I seem to recall Longhorn Lawyer* was one of (probably 1,000s) of the lawyers suing? Beuhler? I assume he is not scrooge-mcducking on his portion of the settlement then?

 

 

Link to comment
Share on other sites

18 minutes ago, TwiceHorn said:

I know.  Just thought I'd clarify since others have accused me of such things.

Appreciate your coming into it and explaining things.  I see there is a bill pending in Congress to amend the Code to make this less feasible.  

There is such a bill and I haven't seen where it currently stands.  

Link to comment
Share on other sites

5 minutes ago, GringoSalado said:

Water is wet and all but jesus fuck with all the lawyers on this site.

 

I'm only interjecting to observe that I seem to recall Longhorn Lawyer* was one of (probably 1,000s) of the lawyers suing? Beuhler? I assume he is not scrooge-mcducking on his portion of the settlement then?

 

 

What on earth are you talking about?

Edited by Dahobbs
Link to comment
Share on other sites

58 minutes ago, Chad Fuck said:

J&J knew its talc products had asbestos in it.  It knew that asbestos killed people.  It overtly hid this information from any government enforcement agencies, from the public, and still lies about its asbestos containing talc today.  It is a lying company that killed people.

The way to manage verdicts is not to kill people with your products.

I'm sorry about your grandfather's death.  But you say there is no proof "he used the shit" out of talcum powder.  If that's true, then how do you know?  

 

Because I saw him use it like crazy when I visited. Plus, I'm sure that my dad and aunt would say the same thing if I asked them. Honestly, wouldn't you need receipts instead of hearsay?

Link to comment
Share on other sites

12 minutes ago, Dahobbs said:

What on earth are you talking about?

Longhorn Lawyer, a poster here, was, I thought, an attorney in a suit against J&J. I thought, wrongly(?), he had prevailed.

 

Are you an attorney also, because I thought I was clear by surly standards.

Edited by GringoSalado
Link to comment
Share on other sites

1 minute ago, GringoSalado said:

Longhorn Lawyer, a poster here, was, I thought, an attorney in a suit against J&J. I thought, wrongly(?), he had prevailed.

 

Are you an attorney also, because I thought I was clear by surly standards.

Thujone got one of the early verdicts, IIRC, on talcum powder.  Maybe the first.

GoLL doesn't practice in that area.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.



×
×
  • Create New...