Judge Prevents Injunction Against J&J Asset Splitting

A federal judge has struck down a proposed injunction that was intended to prevent Johnson & Johnson from dodging potential liability from their talcum lawsuits. In an order filed September 20, New Jersey Superior Court Judge John C. Porto denied the motion by plaintiffs stating that they had failed to present “clear and convincing evidence.”

The plaintiffs in this suit, Brandi Carl and Diana Balderrama, argue that Johnson & Johnson is trying to engage in what is called a “Texas Two-Step.” The plaintiffs argue that this financial maneuver would unlawfully shield Johnson & Johnson from any liability the company may owe for its talcum powder’s connection to ovarian cancer.

In simple terms, the plaintiffs argue that by using Texas’ divisive merger laws, Johnson & Johnson could effectively create a shell company, give that shell company all the assets and liabilities of the talcum powder lawsuits that have been filed against the company, and then force that shell company into bankruptcy.

If this were to occur, all talc plaintiffs, both current and future, would be unable to collect any compensation from the bankrupted shell company while Johnson & Johnson itself would still be able to conduct business as usual.

According to the order, Carl and Balderrama believe that Johnson & Johnson is contemplating this maneuver due to “various news outlet reports as well as creditor committee comments in the Imerys Bankruptcy on July 29, 2021 and comments in other related litigation.”

The plaintiffs explicitly state that they only wish to prevent Johnson & Johnson from executing this specific series of actions that they argue are fraudulent and prevent talc victims from seeking the justice they deserve.

But Judge Porto stated that this injunction would “openly invite this court to infer fraudulent [intent] on these defendants” and that he “cannot make that leap” from the evidence presented.

This means that Johnson & Johnson may be able to execute a “Texas Two-Step” potentially denying future plaintiffs the ability to recover damages and escaping from current litigation while only paying “mere pennies on the dollar” for any potential liability.

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