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Explained here why Johnson & Johnson is setting a $2 billion trust

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Johnson & Johnson (NYSE: JNJ) put its obligations for tens of thousands of cases tying talc-based products to cancer into bankruptcy. The company hopes the action will help push a personal injury claims settlement.

Johnson & Johnson corporate partner files for bankruptcy

On Thursday, Johnson & Johnson said that a corporate partner with talc-related liabilities sought chapter 11 bankruptcy protection in the United States Bankruptcy Court in Charlotte, NC. This is a shift in landscape in the years-long lawsuit over whether its talc-based Baby Powder caused asbestos poisoning, ovarian cancer, and other illnesses. The corporation maintains that the powder is safe and does not contain asbestos, even though they stopped distributing it last year.

Although J&J did not file for bankruptcy, it is the latest corporation to use chapter 11 to settle huge numbers of claims over faulty goods or other purported harms.

Over the past five years, Johnson & Johnson’s costs have reached $1 billion, with court papers showing that verdicts and settlements were around $3.5 billion. The move to file for bankruptcy means the company will avoid further trials, and it is a chance to put all talc cases behind it via a bankruptcy settlement. Andy Birchfield, an injury attorney in the talc claims against the company, said:

This stinks. They claim their product is safe and then attempt to hide behind bankruptcy. Here’s another example of the wealthy and powerful using bankruptcy as a hiding place to protect their profits and avoid responsibility.

Johnson & Johnson to set a $2 billion trust for settlements

In July the Wall Street reported that the company had sought services of bankruptcy lawyers to explore its alternatives. However, injury lawyers criticized the plans stating in a court filing that it would abuse Chapter 11 for thriving entities such as Johnson & Johnson to avoid accountability in the court system.

The corporation said that it was offering financial backing for a compensation plan for settling. According to the Wall Street Journal, the company will cover the amounts the court will determine are owed by the bankrupt partners, and J&J will set a $2 billion trust for this purpose. Johnson & Johnson’s EVP and general counsel Michael Ullmann said:

We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases.

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