Durbin Calls Out Johnson & Johnson’s Manipulation of Bankruptcy During Senate Judiciary Committee Hearing

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today questioned Erik Haas, Johnson & Johnson’s (J&J) Worldwide Vice President of Litigation, at a Senate Judiciary Committee hearing entitled “Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy.”  The hearing examined Chapter 11 bankruptcy law and the threat posed to consumers and others by legal maneuvers like the “Texas Two-Step.” 

Durbin stated that Chapter 11 bankruptcy is designed to allow a company in financial distress to reorganize in order to get a fresh start, free from crushing debt.  He noted that Johnson & Johnson, which has exploited the bankruptcy of a shell company it created to avoid liability from talc-related claims, is not in financial distress, but is instead highly profitable. Durbin emphasized that: “In October 2021—when [J&J shell company LTL Management] first filed for bankruptcy—J&J had a market capitalization of approximately $420 billion.  In 2022—the year following LTL’s bankruptcy filing—J&J generated $94.9 billion in sales and $63.9 billion in gross profit.” 

Durbin then challenged Mr. Haas to explain his allegations that talc-related lawsuits against the company are meritless, despite Johnson & Johnson recently proposing an $8.9 billion settlement: “You have dismissed the claims against you for possible asbestos in your product, calling them meritless, and junk science… And yet you put [an] evaluation through LTL of $8.9 billion in these claims.  How can you have it both ways?  How can you be a profitable corporation worth that much money and say these meritless claims worth $8.9 billion, [that] you shouldn’t be responsible for them?” Durbin asked.

Mr. Haas responded by claiming that “we actually provided the claimants, the talc claimants, with more recourse, more assets, than they would have had” if J&J had not pursued its corporate reshuffling and bankruptcy maneuver.

Durbin responded, “There's something missing here.  Why would you create LTL, which made no products whatsoever but simply was there as the repository of some funds for any liability if in fact the underlying company that made this product in question was worth so few assets at the time?  It doesn't follow.”

Returning to Mr. Haas’s claims that lawsuits against Johnson & Johnson that allege that Baby Powder contained asbestos are meritless, Durbin asked about reports that J&J has changed their Baby Powder formula.  Mr. Haas confirmed that J&J had, in fact, stopped using talc in its products.  Durbin responded, “It had nothing to do with your potential liability?”

Mr. Haas then replied, “It had to do with the demand that had decreased due to false and misleading advertising… these claims are meritless.”

“Meritless, but worth $8.9 billion?” asked Durbin.

Durbin concluded, “You make two arguments here—meritless, claimants get nothing, they recover nothing; and yet someone comes up with a figure of $8.9 billion and you jump at it?  You can’t have it both ways.  You just can’t argue both ways.  You went into bankruptcy court to limit the liability [the company was facing] Johnson & Johnson.  Luckily, at one or two different levels, the court has said that this is a sham—this is a maneuver that is not anticipated by the bankruptcy code.”

Video of Durbin’s questions in Committee is available here.

Audio of Durbin’s questions in Committee is available here.

Footage of Durbin’s questions in Committee is available here for TV Stations.

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