J&J tries to block baby powder lawsuits by 40,000 patients. A court has question Critics say a legal maneuver by one of the world's wealthiest corporations could set a precedent, allowing non-bankrupt companies and rich individuals to avoid liability for wrongdoing.

J&J tried to block lawsuits from 40,000 cancer patients. A court wants answers

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LEILA FADEL, HOST:

Johnson & Johnson was back in court yesterday defending its efforts to block tens of thousands of lawsuits linked to Johnson's baby powder.

RACHEL MARTIN, HOST:

A growing number of people, mostly women, say there is asbestos in the Johnson & Johnson powder, which gave them cancer. J&J denies wrongdoing, and the company is using a controversial bankruptcy maneuver to block the lawsuits.

FADEL: NPR's Brian Mann has been following this case and joins us now. Hi, Brian.

BRIAN MANN, BYLINE: Hi, Leila.

FADEL: Brian, what was at stake in the courtroom yesterday?

MANN: Well, really, the question is whether this is a legitimate use of the bankruptcy system. One of the federal appeals court judges asked point-blank whether J&J's maneuver here is just a ploy to gain legal advantage over all these sick people who are suing the company.

FADEL: So remind us how the maneuver worked. How can a wealthy corporation use bankruptcy like this?

MANN: Yeah, this is really the controversial part. Last October, J&J spun off a new subsidiary, brand-new company. Then they pushed all the liability tied to these baby powder lawsuits onto the books of that new firm, which then immediately filed for bankruptcy. So what that means is that overnight, roughly 40,000 people with claims against J&J, this super wealthy corporation, were told they would have to deal instead with a bankrupt company with basically no assets. I spoke about this with Hanna Wilt from New Jersey, who believed Johnson's baby powder caused her mesothelioma, and she was furious.

HANNA WILT: What I see is who can play the game best? Big corporations trying to work the system in a way that they don't have to take full responsibility is not something new.

MANN: And Leila, Wilt died in February while her case was still caught up in all this legal wrangling.

FADEL: Oh, my gosh. Now, this case involves tens of thousands of people, but it's also being described as precedent-setting for other big corporations. Why?

MANN: Well, the concern is that if J&J is allowed to go forward with this strategy, lots of other wealthy companies will follow suit. Jon Ruckdeschel is an attorney with clients suing J&J.

JON RUCKDESCHEL: The floodgates will be opened. If companies that sicken and kill people are allowed to create fake corporations, bankrupt that company and have business as usual, there's no reason why everybody wouldn't do it.

MANN: And the U.S. Justice Department actually shares this concern. In court yesterday, a DOJ attorney argued that J&J's legal maneuver here subverts the bankruptcy system and should be rejected by the court.

FADEL: Now, J&J's attorney was in court yesterday to answer questions about this. What did he say?

MANN: Yeah. J&J was represented yesterday by one of the most high-profile attorneys in the country, Neal Katyal, who served in the Obama administration. He pointed out that J&J has promised to back a bankruptcy deal here to the tune of $60 billion, money he says would go to cancer patients. Katyal also argued the bankruptcy process could be faster than trying to deal with all these thousands of lawsuits in civil courts. I spoke with Lindsey Simon, a bankruptcy expert at the University of Georgia, and she says this argument does have merit.

LINDSEY SIMON: Bankruptcy can be very efficient. And again, it takes away some of the element of uncertainty, this idea outside of bankruptcy, you never know what you're going to get.

MANN: So despite the controversy here, this is a big question. Could bankruptcy be a shortcut to resolving all these baby powder cases?

FADEL: So where does this go next?

MANN: Well, this court in Philadelphia is expected to rule quickly, but the legal experts say this is also likely to go on to the U.S. Supreme Court. It's so precedent-setting. Meanwhile, all these people suing J&J - a lot of them, again, incredibly sick - they're just going to have to keep waiting.

FADEL: NPR's Brian Mann, thank you for your reporting, Brian.

MANN: Thank you.

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