While many of us have danced the Texas 2 Step, I am not talking about the country dance step. Instead I am referring to a controversial bankruptcy procedure used recently by Johnson & Johnson in response to the 40,000 lawsuits filed againt J & J involving people allegedly injured or killed by baby powder. On Cut to the Chase: podcast, legendary mass tort attorney Rick Kuykendall explains the Texas 2 Step and how an appellate court rejected it. As Rick describes, the process involves a company setting up a shell company and transferring all the liabilities (in this case the lawsuits filed against them) to the shell company which then files for bankruptcy protection and avoid/reduce the corporate wrongdoer’s responsibility from fully compensating it’s victims. Rick also explains how J & J has known for decades that their baby powder contains cancer causing agents, yet continued to sell the product all over the globe. Recently, J & J voluntarily took the product it off the shelf. To hear Rick on episode 109, click here. https://podcasts.apple.com/us/podcast/cut-to-the chase/id1551362164 i=1000599243070
3M UTILIZES A SIMILAR BANKRUPTCY MANEUVER-SAME RESULT
Not only has J & J reached into their bankruptcy bag of tricks, 3M’s subsidiary (Aearo Technologies) recently tried a similar tactic in response to the largest mass tort ever involving 230,000 veterans who are claiming hearing loss or ringing in the ears due to defective earplugs supplied by 3M to the U.S. Army for over a decade. After 13 jury verdicts in favor of Veterans against 3M totaling $300 million, Aearo filed for bankruptcy and asked the Court to apply the bankruptcy protection to 3M. The Court declined to afford 3M such protections without 3M actually filing for bankruptcy. For the latest update on that litigation, listen to co-lead counsel Mike Burns on episode 103. https://podcasts.apple.com/us/podcast/cut-to-the-chase/id1551362164?i=1000592512229
J & J can request the Supreme Court to review the 3rd Circuit’s decision. If the 7th Circuit denies Aearo’s Appeal, Aearo can also request the Supreme Court to review the decision. If SCOTUS refuses to consider the cases or ultimately rules against Aerao and/or J & J, the cases would go back on the trial docket. There is always the possibility of the cases being settled. Recent reports show that to be a distinct possibility in the baby powder cases. While the trial judge in the 3m combat earplug Judge has ordered the parties to mediate on multiple occasions, there has not been any apparent progress on resolution despite numerous large verdicts going against 3M. 3M has appealed all of it’s losses primarily on the government contractor defense, which requires that the contractor make the product according to the contract’s specifications. Many pundits have pointed out that the facts in the case are not showing that defense to be as solid as 3M would like.