New Talc-Related Class Action Lawsuit Goes After J&J for Fraudulent Conveyance

By | May 22, 2024

With recent news that Johnson & Johnson is going forward with a third bankruptcy plan of a subsidiary to settle tens of thousand of lawsuits that its talc products cause cancer, a class-action lawsuit was filed today alleging the company’s fraudulent manipulation of the bankruptcy code.

The suit was filed in U.S. District Court for the District of New Jersey by a handful of individuals claiming they have suffered with cancer and mesothelioma as the result of using J&J’s talc-based powder products.

Early this month, J&J announced it would try to garner consensus internally and from 75% of claimants to move forward with a nearly $6.5 billion proposed settlement to end the years-long litigation against it via another bankruptcy filing from it’s LTL Management subsidiary—created to absorb the talc liability. Courts have twice rejected the company’s attempt to use the bankruptcy system to settle the cases.

Related: J&J Effort to Resolve Talc Lawsuits in Bankruptcy Fails a Second Time

J&J has been steadfast in its denial that its talc products cause cancer.

“We will immediately move to dismiss this latest ‘Hail Mary’ frivolous filing,” said Erik Haas, worldwide vice president of litigation for Johnson & Johnson, in an emailed statement.

However, the lawsuit filed May 22 by the product’s alleged victims represented by a half dozen law firms accuses J&J of fraudulent conveyance—”pursuing a strategy of repeat fraudulent transfers and serial bad faith bankruptcy filings to hinder, delay, and defraud” the plaintiffs from having their day in court or getting any kind of recovery.

“Johnson & Johnson is playing a dark game of chess with this country’s financial and judicial systems,” said Levin Papantonio Rafferty attorney Mike Papantonio in an emailed statement. “With a net worth of nearly $400 billion, this corporation has deliberately manipulated assets to sidestep its obligations to ovarian cancer victims and in so doing has robbed them of true and rightful justice.”

The lawsuit seeks a declaration that J&J’s actions have been fraudulent and done in bad faith. It also seeks “compensatory and punitive damages to address the defendants’ malicious abuse and malicious use of process.”

The 100-page lawsuit outlines J&J’s alleged fraudulent transfers and mergers, pulling off the so-call “Texas two-step” that formed LTL shortly before a multidistrict litigation trial involving more than 50,000 cases was to begin in April 2022. LTL then filed twice for bankruptcy. J&J, according to the lawsuit, fraudulently transferred funds to, and capped funding agreements with, subsidiaries in order to shield it from liability.

The law firms said they have contacted others involved in the talc litigation to warn them of what they call the pitfalls of the latest bankruptcy plan “that would settle plaintiffs’ claims at a fraction of their worth.”

“This latest filing – signed again by the same small group of plaintiffs’ lawyers who have fought every single effort to resolve this litigation to date—is more of the same. The question remains: Why won’t they let claimants decide for themselves what is or is not in their own best interest? Why are they so desperate to stop the vote?” said Haas.

“Make no mistake, the facts are clear. The company has offered one of the largest resolutions in the history of mass tort litigation,” he added.

The case is Murphy et al. v. LTL Management Inc. et al., Case No.3:24-CV-06320, U.S. District Court, New Jersey.

Topics Lawsuits Fraud

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