By: Charlotte Plaskwa
The household name Johnson & Johnson have been embroiled in huge legal battles over its talc-based products. Plaintiffs in these lawsuits allege that these products caused ovarian cancer and other ailments due to contamination with asbestos, a known carcinogen often found alongside talc in nature. The controversy traces back decades, with allegations that Johnson & Johnson knew about the asbestos contamination as early as the 1970s but chose not to make this information public. A watershed moment in the legal saga occurred in a St. Louis courtroom, where 22 women linked their ovarian cancer to the long-term use of these talc products, leading to a staggering $4.69 billion verdict against the pharmaceutical giant. The courtroom was filled with emotional testimonies from women who had endured immense suffering, detailing their battles with cancer and the toll it took on their lives and families. These women represent just a small fraction of the 61,000 people who have filed personal injury lawsuits against Johnson & Johnson over its talc products.
Despite the gravity of these claims and the substantial evidence presented in court, Johnson & Johnson continued to deny any asbestos contamination in their products. Nonetheless, the company has decided to discontinue the use of talc in their iconic baby powder formula. The company announced plans to settle these ongoing lawsuits for $6.48 billion by filing for bankruptcy through a subsidiary, a legal manoeuvre that effectively limits the company’s financial losses, while leaving many feeling that justice remains elusive.
This legal tactic is not unique to Johnson & Johnson. A similarly troubling case is that of Purdue Pharma, the manufacturer of OxyContin. The Sackler family, owners of Purdue, heavily marketed OxyContin as a non-addictive painkiller, despite evidence to the contrary. As addiction rates and related lawsuits skyrocketed, Purdue Pharma filed for bankruptcy in 2019, proposing a settlement that would include a $4.27 billion contribution from the Sackler family in exchange for broad legal immunity.
What do both of these cases have in common? Non-debtor releases in bankruptcy filings. This is a legal strategy commonly used by large corporations to shield themselves from lawsuits. When a big company files for bankruptcy through one of its subsidiaries (a smaller company legally independent but controlled by a larger parent company, such as J&J and Purdue Pharma, as they own more than half of the subsidiary’s stock), it can use this process to settle many lawsuits at once, often for less than required if each case was litigated individually. By doing so, the main company can minimise their financial losses and protect other parts of its business from being dragged into these lawsuits. This can also shield the company’s executives from personal liability, meaning they avoid being held personally responsible for the harm caused by their products. This way, both the company and its leaders may evade full accountability for the issues caused by their products and actions.
It’s not just pharmaceutical companies that are leveraging this legal loophole. Directors and executives of the Weinstein Company made use of this strategy after Harvey Weinstein was found guilty of sexual misconduct on over 50 counts. Following Weinstein’s legal fallout, bankruptcy court approved a $17 million settlement for the victims, with insurers providing $35m under the liquidation plan. Notably, the agreement also granted legal absolution to the company’s directors and officers, who continue to reject liability for Weinstein’s behaviour.
Furthermore, non-debtor releases and filing for bankruptcy offers companies protection from future legal challenges, ideal for situations like the Johnson & Johnson talc controversy, where the effects of asbestos exposure may not become apparent for many years. Asbestos, like other environmental carcinogens, has a notably long latency period. Often, the diagnosis of conditions such as mesothelioma emerges decades after the initial exposure, typically not manifesting until 20 years or more have passed.
It’s particularly ironic that J&J are attempting to use what has been dubbed “the bankruptcy cheat code” to settle the mounting lawsuits against them, as the legal tactic was first utilised in the 1980s for lawsuits also related to asbestos exposure. The Johns-Manville Corporation, once the U.S.’s largest asbestos manufacturer and distributor, serves as a precedent. Founded in 1858, the company expanded over the years, becoming especially known for its construction and insulation materials containing asbestos. During WWI and WWII, asbestos was heavily used for ships and aircraft, boosting the company’s growth. By the 1980s, the adverse health effects of asbestos, like mesothelioma and lung cancer, became undeniable, leading to over 9,000 lawsuits against Johns-Manville. In response, the company filed for bankruptcy in 1982, a move that allowed them to restructure and manage liabilities while continuing operations. History, it seems, is repeating itself.
The use of bankruptcy filings and non-debtor releases has become a common tactic for large corporations like Johnson & Johnson and Purdue Pharma, signalling a deeper systemic issue within our legal frameworks. The broader implication of these cases is the revelation of a legal system that appears intermittently focused on preserving corporate profitability rather than ensuring justice and accountability. This systemic bias towards corporate protection can erode public trust in the very legal and regulatory frameworks and structures meant to safeguard them. For the victims of Johnson & Johnson’s talc and Purdue Pharma’s OxyContin, the journey towards justice is not only impeded by legal complexities but also by a system that too often prioritises economic interests over human costs.
The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.
Image courtesy of Meer