Consider This from NPR - How The Wealthiest Corporations Are Dodging Lawsuits Through Bankruptcy

Episode Date: April 4, 2022

Thousands of people who claim Johnson & Johnson baby powder caused them to develop cancer cannot sue the company, which used a controversial legal maneuver in bankruptcy court to freeze lawsuits against it.NPR's Brian Mann explains. More from his reporting here. Additional reporting this episode from NPR's Scott Horsley. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Support for NPR comes from NPR member stations and Eric and Wendy Schmidt through the Schmidt Family Foundation. Working toward a healthy, resilient, secure world for all. On the web at theschmidt.org. Kimberly Naranjo had just started her dream job. She was working as an addiction counselor in Salt Lake for the county sheriff's office. Three days into working at the sheriff's department, I felt a pain in my side. The next week I was diagnosed with mesothelioma. It all happened so fast. Mesothelioma is a rare form of cancer almost always caused by one thing, asbestos. But Kimberly couldn't trace asbestos exposure to any of the places she had lived or worked. The only explanation she testified to a Senate subcommittee in February was baby powder.

Baby powder sold by Johnson & Johnson, which she had used for years as a single mother on her seven children. I had no idea I was exposing them and myself to the deadly asbestos in that white plastic bottle that I associated with motherly love. But how would asbestos have that white plastic bottle that I associated with motherly love. But how would asbestos have gotten into baby powder? The company may have known for decades that its baby powder sometimes contained asbestos, which can cause cancer.

Separate investigations by Reuters and the New York Times in 2018 revealed documents showing Johnson & Johnson worried for decades that small amounts of asbestos lurked in its baby powder. That is because talc, the main ingredient in baby powder, is often found together with asbestos when mined in the earth. The talc can be contaminated with asbestos. When I learned that I could file a lawsuit and have it decided by a jury, I saw a path forward for my family. But that path has been cut short for Naranjo and thousands of other people who make the same claim

that they also have cancer caused by J&J baby powder. I learned that Johnson & Johnson filed for bankruptcy and that I would not receive a court date. I didn't understand. Johnson & Johnson is a really big and thriving company. How can they be bankrupt? Well, Johnson & Johnson wasn't, but a spinoff company it had created called LTL Management was. See, last year, Johnson & Johnson used a Texas law to carve off certain assets and liabilities into a new separate company. So you've got the most solvent company you can imagine that is using this to try to carve off and cordon off its liabilities. David Skeel, a bankruptcy expert at the University of Pennsylvania, told NPR that if J&J escapes

potential liability using this maneuver, it'll open the door for others to do the same. You'd start saying companies push the envelope. It does have enormous implications for liability exposure going forward. Consider this. Johnson & Johnson's story raises a big question. Should a corporation be allowed to shield itself from legal responsibility, as critics claim, through bankruptcy. It'll be up to Congress and the courts to decide. From NPR, I'm Mary Louise Kelly. It's Monday, April 4th. Support comes from our 2022 lead sponsor of Consider This, the new Venture X card from Capital One.

Earn 10x miles on hotels and rental cars and 5x miles on flights when you book through Capital One Travel. Capital One. What's in your wallet? Terms apply. See CapitalOne.com for details. This message comes from NPR sponsor, Sotva, the comfort company. Sotva luxury mattresses are sold online and priced at about 50% less than mattress stores. Visit s-double-a-t-v-a-dot-com-slash-npr-today and save an additional $200. It's Consider This from NPR. There's a name for what Johnson & Johnson did, spinning off certain assets and liabilities into a separate company.

Critics call it the Texas two-step, named for the Texas law that makes it possible. I think if you really look closely at what the bankruptcy code allows, it's not altogether clear that this is permitted. Lindsey Simon, who teaches bankruptcy law at the University of Georgia, told NPR it's possible the courts will eventually stop rich companies and individuals from doing this. I do think there's a realistic chance that at some point a court will say it's not allowed. I have been diagnosed with mesothelioma. Congressional action could change things, and members of Congress from both parties have voiced outrage at this practice. But no bills are even

close to passing. That means any change will likely come too late for Kimberly Naranjo. I was given 12 to 16 months of life, which puts my expiration date at March 2023, one month before my 50th birthday. Naranjo said she's spending her last months preparing her seven kids for life without their mom. Two of them are under 18. My oldest daughter Marie is only 28 and a single mother, and she is going to raise my two children after my death. Naranjo, as we mentioned, is just one of tens of thousands of cancer patients, mostly women, who are suing Johnson & Johnson. In February, those lawsuits were put on hold. After a New Jersey bankruptcy judge ruled the company's spinoff bankruptcy could proceed, that has left many women feeling they are running out of time. And Pierce Brandman reports.

I went to visit Hannah Wilt and her mom, Hope, in a little town on the New Jersey coast. It was a bright morning. Sunshine filled the living room. Hannah was having a tough day. I'm tired and I'm very, very bloated because I get fluid buildup in my belly. Picture a woman in her mid-twenties, bright yellow hair, sitting kind of hunched while we talked. Hannah told me most of her life she was super healthy, but then she started feeling terrible pain in her abdomen. It was really, really weird.

And as the days went on, I started to not be able to walk right. The doctor thought she had cysts on her ovaries. So Hannah went in for what was supposed to be fairly routine surgery. Her mom, Hope, says it's hard talking about that day. The surgery took much longer than it should have. The doctor told Hope Hannah's body was riddled with mesothelioma. Then I just started to wail. It was the worst news any mother could get. Hope then had to tell Hannah. She wasn't just sick, she was dying.

It was the scariest thing to ever hear. And I just remember feeling like, how am I going to do this? This is the moment when Hannah's life also crashed into this complicated legal world. And this new strategy companies are using to block lawsuits when they're accused of wrongdoing. Hannah quickly learned her kind of cancer, mesothelioma, is almost always linked to asbestos. She then learned the FDA had found trace amounts of asbestos in a product she used a lot, Johnson's baby powder. I would use that every day, maybe even like a couple times a day. So Hannah joined roughly 38,000 people with ovarian cancer and mesothelioma who've sued J&J,

claiming tiny amounts of asbestos in Johnson's baby powder made them sick. They also accused J&J of knowing about the risk and not warning customers. There's definitely an aspect of justice. This powerful group of people, they lied and were able to, you know, potentially ruin so many people's lives. NPR asked J&J repeatedly for an interview for this story, and a company spokesperson said no. J&J executives have long maintained in public statements and court filings their talc baby powder is completely safe. No asbestos, they say. No link to cancer. They did take their iconic baby powder off the shelves in the U.S. a couple years ago, but say they only took that step after bad publicity hurt sales. And normally, this is what a lawsuit like Hannah's would answer.

A judge or jury would look at the evidence and decide, did J&J do anything wrong or not? But last October, J&J found a way to shut all these cases down. Here's J&J executive Joseph Wolk speaking on a conference call with investors. There's an established process that allows companies facing, you know, abusive tort systems to resolve claims in an efficient and equitable manner. It's really the bankruptcy courts that will ultimately decide this. You can hear him there talking about bankruptcy court. But of course, Johnson & Johnson isn't bankrupt.

It's worth more than $400 billion. So what J&J did was create a new subsidiary, then shove all those baby powder lawsuits onto the other new company's balance sheet. Then they pushed that new firm into bankruptcy. What I see is who can play the game best. When I visited Hannah Wilt, she was getting sicker, running out of time, and she was outraged J&J's maneuver had worked. Big corporations trying to work the system in a way that they don't have to take full responsibility is not something new. This bankruptcy strategy is becoming more common. Wealthy companies and individuals have used similar maneuvers to block lawsuits in big opioid cases, child sexual assault cases, environmental cases, and on and on.

This angers a lot of people, including members of Congress from both parties, who are considering legislation to limit these maneuvers. Here's Illinois Senator Dick Durbin speaking on the Senate floor, where he pointed out this legal strategy is only available to those with enough money to pay for it. There's a justice system for rich people, powerful corporations, and then there's a justice system for everybody else. In many days, it seems that the gulf between these two systems is just getting wider and deeper. Bankruptcy maneuvers like the one used by Johnson & Johnson do have supporters. Some judges and corporate executives see bankruptcy court as an efficient way to reach closure on complex litigation.

They argue companies sometimes wind up paying victims faster. In this case, while denying their product hurt anyone, J&J offered to create a fund for people with cancer. And last month, a federal bankruptcy judge signaled support for that plan. But this strategy also often leads to legal wrangling and appeals that last months or years while women like Hannah wait. It is so expensive to be sick and I can't work. So like I'm not providing an income. My mom can't work. She's taking care of me. I asked if she was angry about the way the legal system worked. Hannah told me anger and grief were all tangled together. I'm a young girl. My entire life has been dramatically changed.

I think there's a lot of sadness. Hannah died in February. She was 27 years old. Her lawsuit, along with tens of thousands of other baby powder cases, is still stuck in bankruptcy court. While finishing work on this story, I called her mom Hope to check in, and she said it made it harder watching Hannah die without closure. For her to see justice would have not saved her life, but she would have felt like a company like this couldn't get away with causing such

horrible heartache. Again, Johnson & Johnson maintains it did nothing wrong, and it's not clear how a court would rule in any of these baby powder cases if they're ever allowed to move forward. What is clear, what all the experts agree on, is that if J&J's legal maneuver works this time, even more wealthy companies will start using bankruptcy courts to block lawsuits when they're accused of wrongdoing. NPR's Brian Mann. More from his reporting on J&J's bankruptcy case at The Link in our episode notes. You also heard reporting in this episode from NPR's Scott Horsley. It's Consider This from NPR. I'm Mary Louise Kelly.

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