Hopefully This Will Stick

A court has ruled that the Johnson & Johnson subsidiary created to evade liability for asbestos in their baby powder cannot declare bankruptcy.

This is a preliminary ruling, but basically it comes down that they are not broke enough:

A US appeals court has dismissed a bankruptcy petition filed by a unit of Johnson & Johnson, upending the healthcare company’s attempt to resolve billions of dollars of legal claims from customers alleging its talcum powder caused cancer.

The Third US Circuit Court of Appeals on Monday said it had dismissed a bankruptcy filing from J&J’s subsidiary LTL management, preventing it from shifting thousands of legal claims out of trial courts and into the bankruptcy system.

J&J had deployed a legal manoeuvre called the “Texas two-step” to divide the company into two separate businesses before placing one of them, which is facing more than 40,000 cancer claims, into bankruptcy. The company said this would lead to a more “efficient” and “equitable” resolution of the claims.

But the court ruled that only companies facing financial stress can call on the bankruptcy system to help with restructuring. “While LTL faces substantial future talc liability, its funding backstop plainly mitigates any financial distress,” said the court ruling.

………

The ruling means J&J risks being forced to fight talc claimants in civil courts, a process that could last decades and cost the company hundreds of billions of dollars, according to legal filings from LTL.

That's the way the law is supposed to work.  You give people cancer you gotta pay.

………

Legal experts said the ruling could set a precedent and dissuade companies from using complex bankruptcy schemes to handle mass tort claims. 3M, Koch Industries subsidiary Georgia-Pacific, Trane Technologies and a US unit of France-based Saint-Gobain have deployed similar strategies in recent years.

Good.

If anything, corporate bankruptcy should be made even more punitive, with opportunities for claimants to pierce the corporate veil protecting potential claimants.

The, "Heads I win, tails you use," ethos of American business needs to be eliminated.