bankruptcy as a business strategy

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Last year, J&J fobbed it’s talc liabilities off on a spin-off that was set up to fail. Their strategy uses a Texas state law, even though neither J&J, nor the spin-off, is domiciled in Texas.

I forgot, until this morning, to check on the progress of J&J’s clear abuse of the bankruptcy law.

J&J won in court.

February 25, 2022

Johnson & Johnson wins a key court battle in baby powder case

A federal judge has allowed a company spun off by Johnson & Johnson to proceed with a controversial bankruptcy, despite complaints from thousands of people who say they were harmed by the consumer product giant’s baby powder and who could now be denied a chance to sue.

“The Court is aware that its decision today will be met with much angst and concern,” Kaplan wrote in his decision. “The Court remains steadfast in its belief that justice will best be served by expeditiously providing critical compensation through a court-supervised, fair, and less costly settlement trust arrangement.”

https://www.npr.org/2022/02/25/1083061992/johnson-johnson-wi…

Some weeks ago, 3M announced it will spin off a subsidiary, which will probably be stuck with it’s ear plug liability, with the sole purpose of stiffing claimants.

As the J&J case is in Federal court, I’m reasonably confident this SCOTUS would never, ever, “burden” any “JCs” with liability.

Steve

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3M announced it will spin off a subsidiary, which will probably be stuck with it’s ear plug liability

I understand the concern about baby powder (which, after how many millions of parents, babies, and babies who then became parents, is probably overblown), but what’s the deal with ear plugs? People leaving them in too long and complaining about wax compaction or something?

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“what’s the deal with ear plugs? People leaving them in too long and complaining about wax compaction or something?”

the gov’t bought zillions of the ‘ear protector plugs’ from 3M to reduce the noise from gun fire, artillery, jet aircraft on carriers, etc.

they didn’t work as advertised.

Many veterans have had big hearing losses due to ‘malfunctioning ear protectors’.

thus billions in liability

google it

t.

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but what’s the deal with ear plugs? People leaving them in too long and complaining about wax compaction or something?

They didn’t plug well enough.

Update on the 3M thing, even though the company that made the ear plugs is a wholly owned division of 3M, 3M is trying to duck liability by declaring the division bankrupt, as if it was a separate company, not part of a huge, profitable, company.

3M Subsidiary Aearo Technologies Takes Action to Efficiently and Equitably Resolve Litigation Related to Combat Arms Earplugs

ST. PAUL, Minn., July 26, 2022 /PRNewswire/ – 3M (NYSE: MMM) today announced it is taking action to resolve litigation related to Combat Arms Earplugs Version 2 (“Combat Arms Earplugs”). Aearo Technologies and related entities (“Aearo Technologies”), all of which are wholly-owned 3M subsidiaries, have voluntarily initiated chapter 11 proceedings seeking court supervision to help establish a trust – funded by 3M – to efficiently and equitably resolve all claims determined to be entitled to compensation.

https://news.3m.com/2022-07-26-3M-Subsidiary-Aearo-Technolog…

Nice business model: 3M hoovers up all the profits from the division, but, when things go south, pretend it’s a different company.

Some years ago, Honeywell spun off it’s turbocharger division as Garrett, but saddled Garrett with it’s asbestos liability. This was a different deal than J&J’s, because, unlike the J&J scheme, Garrett actually has products and revenue. Garrett went BK under the load of the asbestos liability, and the bankruptcy court handed the asbestos liability back to Honeywell. I’m pretty sure Honeywell is watching the J&J scheme with great interest, and planning to stand up another spinoff that will be set up to fail.

Steve

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Bankruptcy is a brilliant strategy if you are rich and powerful, and a source of shame if you are not.

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