Corporations Avoid Responsibility

Large Corps Use Bankruptcy to Try to Escape Legal Liability for Harms

The biggest corporations in the United States did not grow so large by accident. They grew through innovation, marketing and investment. They also do everything they can to avoid responsibility for when their products injure people.

That companies strategize to minimize their litigation costs is nothing new. Their responsibility to their owners and shareholders requires that they take every measure to avoid unnecessary costs. Costs to pay lawyers or to compensate victims of negligence are considered “unnecessary” to these corporations. Recently, the news has reported on many new cancer cases that have been caused by different products. There is the litigation against Philips NV for CPAP machines causing cancer when the foam in the machines gets into people’s airways. Monsanto has been held responsible for their Roundup Product causing cancer due to the dangerous chemical it uses.

And there is a recent case where the well-known company, Johnson & Johnson, has been held to account for their talc products causing cancer. The problem with their baby power product was that the talcum powder ingredient was mined from sources that included asbestos. Asbestos can cause cancer in humans. In 2018, it was revealed by Reuters that J&J had been aware of a link between their talc and women developing ovarian cancer.

It is one thing for a consumer product to contain dangerous chemicals. It is another thing entirely for the company to learn of the dangers and continue to sell the product without modification. Due to this damaging evidence, J&J was dealt several multi-million dollar verdicts, including one where $2 Billion dollars was awarded by a jury to 22 women who claimed that their ovarian cancer was caused by the product.

J&J Seeks to Escape Liability

Companies in the United States have a right to defend themselves. And they do. They will hire teams of smart and capable lawyers who know how to litigate. Those lawyers will defend the company in Court. And when they lose, they file appeals.

However, J&J used another tactic to avoid paying the real value of the harms they caused: Bankruptcy. But J&J did this creatively. First, they created a separate company which took on all the legal liability (ie: owing the money for claims and judgments). Then, that company declared bankruptcy. In the corporate world, they even have a term for it: the “Texas two-step.”

This clever maneuver is designed to shield off the most expensive problems from the core company so that the owners and shareholders move on, leaving the injured and the families of the dead with less money to share. This would mean that those victims do not get full compensation for their medical expenses, lost income, horrible pain and suffering, and death.

In a major ruling this week, the U.S. 3rd Circuit Court of Appeals ruled that move was improper. The ruling dismisses the Chapter 11 Bankruptcy filing, which would have impacted more than 38,000 lawsuits. J&J is valued at over $400 billion dollars. They had attempted to shovel a mere $2 billion into the “new” company that would have been divided among the claimants. They are not alone as several other companies have recently threatened bankruptcy to escape responsibility for damage caused by their products.

Coogan Gallagher Represents those Injured by Defective Products

If you have used one of the products you see in the news and have learned of a medical problem resulting from those products—infection, cancer, failure requiring more treatment, or other product failures—please give our lawyers a call. The sooner you call, the sooner we can investigate your claim.