December 17, 2021

Durbin, Senate And House Dems: Will Johnson & Johnson Continue To Avoid Accountability To Cancer Victims?

In a letter to the company’s incoming CEO, the Senators and Representatives call out bait-and-switch corporate reshuffling that leaves tens of thousands of cancer patients holding the bag

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee; U.S. Senators Elizabeth Warren (D-MA), and Richard Blumenthal (D-CT); House Oversight and Reform Committee Chairwoman Carolyn B. Maloney (D-NY-12); and Chair of the Oversight and Reform Subcommittee on Economic and Consumer Policy Raja Krishnamoorthi (D-IL-08) today sent a letter to the incoming Chief Executive Officer (CEO) of Johnson & Johnson objecting to the company’s efforts to manipulate bankruptcy laws to evade accountability for harm caused by its products.  In their letter to Vice Chairman of the Executive Committee Joaquin Duato, the members ask if Duato, as incoming CEO, will continue the company’s current efforts to avoid accountability to cancer victims, or if he plans to reverse course.

“In our view, the approximately 38,000 claimants who argue that their cancers were caused by asbestos in your company’s product deserve to have their cases fairly considered,” Durbin and the members wrote.

On November 10, the Senators and Representatives wrote to now-outgoing CEO Alex Gorsky requesting information to help explain why Johnson & Johnson is seeking to deny claimants that chance.  In a reply received on December 1, Johnson & Johnson’s outside counsel provided inadequate information and restated the dubious claim that the company’s convoluted corporate maneuvering will “provide significant benefits to the claimants.”

“Having offloaded all talc liabilities onto a shell company, Johnson & Johnson is now arguing in bankruptcy court that it should be shielded from all relevant claims. Should Johnson & Johnson be successful, cancer victim claimants will be forced to seek restitution from the shell company alone and will likely receive pennies on the dollar, if anything at all,” Durbin and the members continued.

Durbin and the members concluded, “We write today to inquire if you, as incoming CEO, will continue Johnson & Johnson’s current efforts to avoid accountability to cancer victims, or if you will reverse course. Your response will help inform the direction of our oversight and legislative response to this important issue.”

In July, the members introduced the Nondebtor Release Prohibition Act of 2021, which would rein in various bankruptcy loopholes that corporations and bad actors such as the Sackler family and Johnson & Johnson exploit to dodge accountability, including the ‘Texas two-step’ maneuver.

The full text of the letter is available here and below:

 

December 17, 2021

 

Dear Mr. Duato:

 

On November 10, 2021, we wrote to Alex Gorsky, Johnson & Johnson’s current CEO, who you are due to replace on January 3, 2022, regarding our objections to Johnson & Johnson’s ongoing attempt to use bankruptcy loopholes to evade accountability for the harm allegedly caused by your company’s talc baby powder.^[1] In our view, the approximately 38,000 claimants who argue that their cancers were caused by asbestos in your company’s product deserve to have their cases fairly considered. We asked Mr. Gorsky to provide information to help explain why Johnson & Johnson is seeking to deny claimants that chance.

On December 1, 2021, we received a response letter from Johnson & Johnson’s outside counsel. Unfortunately, this letter largely restates the dubious claim that Johnson & Johnson’s convoluted corporate maneuvering will “provide[] significant benefits to the claimants.” Having offloaded all talc liabilities onto a shell company, Johnson & Johnson is now arguing in bankruptcy court that it should be shielded from all relevant claims. Should Johnson & Johnson be successful, cancer victim claimants will be forced to seek restitution from the shell company alone and will likely receive pennies on the dollar, if anything at all.

Chapter 11 bankruptcies are often sought by struggling businesses as a last resort. Johnson & Johnson is not, however, financially strained. Your company’s projected sales for this year exceed $90 billion and corporate executives have made numerous statements about the company’s financial strength.^[2] Far from approaching the bankruptcy court out of necessity, Johnson & Johnson is seemingly attempting to exploit the bankruptcy system to dodge legal claims to which you are more than capable of responding.

In our November 10 letter, we noted that a key element of the bait-and-switch corporate reshuffling—the “Texas two-step”—involves the shell company filing for bankruptcy in a favorable jurisdiction. While the eventual outcome in Johnson & Johnson’s case is far from certain, a North Carolina bankruptcy judge has rejected this element of your attempted maneuver, and has sent the case to New Jersey, where Johnson & Johnson is headquartered. This ruling is a step in the right direction, but while the bankruptcy court considers this matter, tens of thousands of cancer victims will continue to be left with neither compensation nor a fair day in court.

We write today to inquire if you, as incoming CEO, will continue Johnson & Johnson’s current efforts to avoid accountability to cancer victims, or if you will reverse course. Your response will help inform the direction of our oversight and legislative response to this important issue.

 

Sincerely,

 

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