Attorneys Vow to Oppose J&J’s Third Bankruptcy Attempt

Published 3 months ago via Business Wire

Allegations of ballot manipulation, legal precedent and forum shopping pose major obstacles to company’s plan

Attorneys representing tens of thousands of women with ovarian cancer linked to use of Johnson & Johnson (NYSE:JNJ) talc products say they will immediately seek dismissal of a pre-packaged bankruptcy that the company filed earlier today in Texas.

In its filing, the New Jersey-based pharmaceutical giant claims that approximately 83% of those plaintiffs surveyed by the company have agreed to the plan’s terms, a percentage that forms the legal threshold for launching a so-called “pre-pack” bankruptcy.

“We view this so-called vote as another fraudulent effort by J&J to manipulate the bankruptcy process and minimize the legitimate claims of ovarian cancer victims,” says Andy Birchfield of the Beasley Allen Law Firm. “It’s preposterous for a company valued at $400 billion, with $90 billion in annual revenue, to resort to bankruptcy to unfairly compensate the women whose lives it has irreparably harmed.”

The Financial Reality

Even if the amount that J&J proposes to pay plaintiffs as part of its bankruptcy plan were confined to scientifically sound, Daubert-tested claims (the legal standard for scientific evidence), the average compensation per claim would still be significantly less than even the medical costs to treat most ovarian cancer patients.

"This proposed compensation is a gross undervaluation," said Birchfield. "Ovarian cancer claims involve measurable costs that are far greater than what is being offered."

  • Medical expenses for treating ovarian cancer can range from more than $1.5 million to less than $50,000, depending on the age of the victim and the stage of the cancer.
  • The weighted average of medical costs for treating ovarian cancer is more than $220,000. Likewise, lost wages are objective and calculable.
  • Lost wages for ovarian cancer claimants average more than $230,000.

Beyond these objective costs, attorneys note there are subjective factors such as pain and suffering and punitive damages that merit consideration. The pain and agony that ovarian cancer victims experience is staggering – certainly to be valued at a multiple of the medical costs.

Also, attorneys representing ovarian cancer victims question the integrity of the bankruptcy voting process. “We believe there are major irregularities in J&J’s voting process that were designed to make a mockery of the pre-pack process, including votes from people who have cancer, but not ovarian cancer,” Birchfield said. “There’s no reason for them to be a part of this process.”

“Accepting liability for someone’s illness without a legal claim is something J&J would never otherwise consider or accept but for the opportunity to use those votes to stuff the ballot box and overwhelm the votes of ovarian cancer victims whose claims have been prosecuted in both federal and state court, just a further example of the company’s hypocrisy in this litigation.”

Birchfield also points to the recent ruling by the U.S. Supreme Court in Harrington v. Purdue Pharma as a reason that J&J’s plan should not succeed. In that case, the Court ruled that a multibillion-dollar bankruptcy plan for Purdue Pharma, the maker of the opioid OxyContin, could not move forward because the plan shielded the company’s wealthy owners from liability for opioid-related claims.

“Even with an overwhelming majority of creditors approving the indemnification scheme, the Court ruled financially solvent entities or individuals cannot use the bankruptcy courts as a shield to escape liability for marketing and manufacturing dangerous products,” Birchfield said. “J&J’s plan mirrors the fraud attempted by the Sackler family and offers another reason for denial.”

Forum Shopping and Legal Precedent

In addition, Birchfield says J&J’s filing in the Southern District of Texas should also raise questions.

“This is a blatant attempt at forum shopping that has been denied before and should be again,” he says. “There is no legitimate reason to allow J&J to pursue this case in Texas, and this court should at the very least transfer the case to New Jersey, just as a North Carolina court did previously.”

In the company’s two earlier bankruptcy filings, the New Jersey court as well as the U. S. Court of Appeals for the Third Circuit found that J&J filed bad faith bankruptcies, ruling that J&J and its shell subsidiary did not warrant bankruptcy protection as financial distress was lacking.

Empty Promises to Victims

Beyond the inadequacy of J&J’s proposed financial compensation, an equally alarming concern is the complete uncertainty surrounding when, if ever, ovarian cancer victims will receive payment. Similar bankruptcies have dragged on for years without claimants seeing any compensation.

“We will urge the court to scrutinize J&J’s promises closely,” Birchfield said. “The public must understand that J&J is not committing to timely or guaranteed payments. If this plan is imposed on claimants, J&J will effectively escape accountability for its talc-contaminated baby powder, and ovarian cancer victims may never see just or equitable compensation.”

The tactic of stashing liabilities in a subsidiary and then plunging it into bankruptcy to stymie litigation – known as the “Texas Two-Step” – is also facing legislative scrutiny. Bipartisan legislation has been introduced in both the U.S. Senate and House of Representatives to prohibit both the practice and stays of litigation against non-bankrupt affiliates involved in the maneuvers.

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