[akgoel]

Matt Levine had a more charitable reading of the Texas Two-Step for J&J:

https://www.bloomberg.com/opinion/articles/2023-01-31/matt-l...

The idea here was that a bankruptcy judge could more fairly distribute $61.5 billion dollars among claimants than having them sue J&J one at a time and getting uneven awards and costing everyone more lawyer hours.

[akira2501]

Is a class action somehow impossible if they don't declare bankruptcy? Or they can't distribute money as easily as in a class action? The mechanics of this don't sound so absolutely necessary.

Further, if your company produces products that kill or injure people, then why should we show any interest in maintaining that companies existence with odd legal hacks like this? Shouldn't they be disbanded, their assets sold, and new businesses allowed to exist in that space?

What are we, in total, as a society, gaining by allowing this?

[nl]

> Is a class action somehow impossible if they don't declare bankruptcy? Or they can't distribute money as easily as in a class action?

The issue is that there might be multiple actions, and compensation might be used up byt the first one (eg, if the company was sent into bankruptcy by the first class action, then subsequent cases would be useless). This is a pretty reasonable argument IMHO.

> Further, if your company produces products that kill or injure people, then why should we show any interest in maintaining that companies existence with odd legal hacks like this?

This seems fairly debatable.

J&J produces a lot of things that aren't talc, and it isn't like they are a cigarette company that knew the health risks. The risks from talc weren't known are are still debated, and it is a thing that has been used for thousands of years without known issues.

Separately there's a good argument that keeping the company alive is better for those affected because it can fun ongoing liabilities.

[angus-prune]

Thats not actually the issue with talc.

The talc itself is not believed to be the carcinagen, but the talc is contaminated with asbestos. Interal documents show that J&J knew about the contamination since 1971. Asbestos was known to be carcinegic at this point and the first bans of asbestos use in construction began rolling out in 1972.

They knew and hid the health risks, just like a cigarette company.

[autoexec]

They should be behind bars. They're serial killers.

[mschuster91]

> Separately there's a good argument that keeping the company alive is better for those affected because it can fun ongoing liabilities.

There's a better solution: the government pays all the fines and then nationalizes the company until the profits have paid back everything owed plus reasonable interest. Then, it's sold off. The original owners get nothing.

That way, there's also an incentive for current shareholders to pressure their management to behave ethically - clearly, there's a massive lack of such in the current framework.

[dumpsterdiver]

> Further, if your company produces products that kill or injure people, then why should we show any interest in maintaining that companies existence with odd legal hacks like this?

> This seems fairly debatable.

To be fair, we might not have some of the drugs many of us are prescribed to us if we just cancelled every company that ever hurt anyone with experimental drugs.

[autoexec]

J&J wasn't accidentally hurting people with experimental drugs.

They had full knowledge that they were poisoning people, and they actively hid that from the people they were killing, because J&J wanted more of their victim's money before they died, and a continuous supply of new victims to take the place of the old ones.

[themitigating]

Your use of "cancelled" seems to be an attempt to imply their actions are similar to a comedian using the N word.

People died and they knew their product was dangerous. That's akin to murder.

[dumpsterdiver]

> Your use of "cancelled" seems to be an attempt to imply their actions are similar to a comedian using the N word.

No, those are your words. The discussion I was participating in was talking about medication, not race warfare.

My statement was also generalized, but you apparently applied it to a specific scenario (which I am unfamiliar with) that fits your narrative.

[ClumsyPilot]

> cancelled every company that ever hurt anyone with experimental drugs.

"This baby powder is an experimental drug and may have unknown and lethal side effects" - did it say this on the packaging?

If it did, fair play. Some people would be happy to try experimental and dangerous cure for cancer.

But somehow I have a suspicion that the potential market share for experimental and dangerous baby powder is about 0%.

[master-lincoln]

Maybe if we would have taken care malicious actors are removed we would now have more actors instead of a few giants who seem too big to fail

[kevinventullo]

Somehow I feel like if J&J declared bankruptcy due to the lawsuit, life would go on. They have plenty of competitors.

[ClumsyPilot]

> J&J produces a lot of things that aren't talc

And I donate to charity, but if I put a poison in coffee before selling it to you, I will be in prison, but JJ gets to limit liability

[jachee]

Preserved Shareholder Value, and another middle finger from the Invisible Hand.

[littlestymaar]

But then it's J&J as a whole that should go bankrupt, no a shell company designed for damage-control purposes…

[scott_w]

That’s all well and good until you discover that you were affected by something else they did but you can’t sue them any more because they went bust servicing the talc powder claims.

[c0nducktr]

Just because there are more people who might need to sue the company isn't a reason to allow it to continue to operate. This is just 'too big to fail' but for different (and now theoretical) reasons.

Maybe the solution is to nationalize J&J.

"You can't bankrupt my company because someone might need to sue me later" is absurd reasoning.

[scott_w]

And what good will bankrupting J&J at the first lawsuit do for society?

[orthecreedence]

"What good will it do society to punish people who do heinous things to others?" It acts as a great deterrent to keep other corporate stooges from entering into high-risk activities. In many cases I advocate for "restorative justice" as opposed to punishment, but in the case of faceless corporations we can crash their value to 0 and call it even.

We have a system of private ownership where the owners get to reap the rewards of others' labor, but when they do something wrong they pull the "but think of the employees" bullshit. No. Full ownership, full liability.

[scott_w]

Bankrupting J&J would achieve none of the things you say you want. It would just mean the first to sue gets everything and everyone else gets nothing. The assets get stripped and sold off to the next company who can just continue to do the same thing.

[littlestymaar]

Ask yourself “what good had jailing Charles Manson at the first lawsuit done for society?” then remember that J&J is responsible for thousands more death than Manson, and likely more than all psycho killers in the history of the US combined…

Rogue corporations are killing people at a scaled rivalled only by dictators…

[scott_w]

Comparing a pharmaceutical company to Charles Manson or Pol Pot is… frankly insane.

[sigilis]

If I understand your statement correctly, the idea posited is that a company which has had a large ruling against it should be able to avoid paying out the total amount assessed against it because someone might also have been harmed that could theoretically bring suit?

I don’t really think that some hypothetical future lawsuit is a valid basis to avoid the consequences arrived at for the current one. If one can simply make a virtual entity that holds all of your liabilities and then set it on fire to avoid paying them, isn’t that just a modern play on the ancient tradition of the scapegoat?

Putting all your sins on someone or something else didn’t absolve you then and it should not be a legal way to get out of paying for your mistakes now.

[teraflop]

Please read the Matt Levine article that was linked a couple of comments upthread.

You (and many other commenters) seem to be under the impression that the bankruptcy procedure was done for the purpose of "avoiding paying out the total amount assessed against it", when that was not at all the case.

[sigilis]

I read that article, and currently consider myself inadequately informed to analyze the legal and financial implications of the particulars of the J&J issue. It seems rather complex and I’m not a lawyer who has reviewed the relevant filings and documents.

My comment was only intended to be a response to the idea posited that some future hypothetical case should have any bearing on present reality. This belief in imaginary cases’ right to be considered in the legal system is turning up in interesting places lately, and I felt compelled to weigh in.

Apologies if I was off topic or confusing.

[scott_w]

You didn’t understand my statement at all. You also didn’t understand the Matt Levine article because he doesn’t posit any of the things you claim either.

All I can suggest is to reread Levine’s article.

[caditinpiscinam]

Are you saying the company shouldn't have to pay people it harmed in the past, so that it has money to pay people it might harm down the road?

[scott_w]

That’s not what I said and you’d know that if you read my response or the Matt Levine article quoted by many people here.

[caditinpiscinam]

As I understand it, the article describes how, for companies that are going bankrupt, handling victim payouts through bankruptcy is more equitable, since it considers the situation holistically, rather than on a first-come first-serve basis.

However, for companies like J&J that aren't actually going bankrupt, this process also allows them to protect their business and to pay less than they would normally. Otherwise, why wouldn't they just file for bankruptcy directly?

[scott_w]

> this process also allows them to protect their business

Obviously, yes.

> to pay less than they would normally.

Not necessarily.

You missed the part where they have a specialist court divide up the claims in a single go, rather than have ad-hoc juries hand out different awards to different claimants.

> aren't actually going bankrupt

You’re missing the part that this is kind of allowed in Texas courts. It’s not unrestricted - the court kicked back the first attempt.

[UncleMeat]

Okay. There is zero chance that the corporate lawyers are doing this to ensure that the next people killed by J&J can collect.

“We can’t pay out for these deaths because then we will be out of money to pay out for the other deaths.”

This is only a compelling argument if J&J agrees to dissolve their entire company and work with the courts to distribute 100% of their wealth to aggrieved parties. Let’s see how much they cooperate with that.

[scott_w]

The corporate lawyers aren’t the ones allowing this, the lawmakers are.

Your follow up points don’t address my point at all.

[UncleMeat]

I don't believe for even one second that this process is designed and executed for the legitimate protection of the aggrieved.

[scott_w]

Why it was designed an executed does nothing to refute my point.

[ClumsyPilot]

This is the most absurd reasoning I've seen al week

"I am sorry, we cant imprison this murderer for life, what if he killed someone else and they need to sue him too, we can't i prison him for life twice!"

[scott_w]

This is a ridiculous comparison. Murder is criminal law and we’re talking about civil law (tort). The two are handled completely differently, with different laws and procedures.

[ClumsyPilot]

Yeah I know - unlike corporations, individuals can’t kill people and escape criminal responsibility. It happens time and again, look at DuPont, Boeing max, etc.

[shkkmo]

Meanwhile, J&J gets to keep paying dividends to shareholders like they have throughout the process. Funny how that works.

[User23]

Also maybe further hollowing out our country’s manufacturing base is kind of short term thinking.

[littlestymaar]

I know some of you love to be contrarians beyond reason, but come on, I'm sure you realize the insanity of your argument above…

[puchatek]

Damage control and intimidating researchers, it seems.

[FireBeyond]

Matt Levine's spin on this is horribly pro-corporate.

The Texas Two-Step isn't a concept borne from bankruptcy courts.

Would that it were so.

You talk about charitability, but here's a question for Matt, you and others:

"Is this strategy called the Texas Two-Step because:

1) it assists claimants and plaintiffs (your adversaries) to bond together and present one solid unified case against you, or...

2) because it assists you to elegantly dance around your liabilities?"

[somenits]

You know you've lost the argument when your only response to actual facts and analysis is "yeah but what does this name sound like".

[FireBeyond]

Alright then, here:

The Texas two-step allows solvent companies to shield their assets from litigants using protections that are normally reserved for bankrupt companies. The goal of a Texas two-step is for the parent company to gain a third-party release of all liabilities it assigned to its spinoff, thus preventing litigants from pursuing those claims against the parent.

And yet here we have multiple people trying to spin things as "Oh, J&J just want what is fair for the litigants!"

Fun fact: the majority of large corporations who utilize the Texas Two Step somehow manage to avoid paying out anything more than a token sum, either through the "new" entity that holds the liabilities, or the "old" entity which promised it'd fully fund the liability holding entity.

Georgia Pacific did this. Pledged $1B, ended up funding $175M. The entity went bankrupt three months later with 62,000 claims fighting over those scraps for mesothelioma (i.e. an average claimant getting less than $3,000 - before legal costs).

Saint-Gobain did the same thing. More building products liabilities. Less than $100M in assets and no operations to fund more than 6,000 asbestos claims per year.

> Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.”

Trane Technologies. Same deal.

And yet you and Matt talk about how the whole concept is "designed to be more fair for the claimants".

"Facts and analysis" in the three companies who have done this before J&J would disagree with you. Strongly.

[somenits]

Can you find a source saying that Georgia Pacific or any other company was able to use this process to shield the parent company from liability? I’m not finding anything to that effect. Everything I see complains about them using the process to improperly consolidate the cases.

>Georgia Pacific did this. Pledged $1B, ended up funding $175M. The entity went bankrupt three months later with 62,000 claims fighting over those scraps for mesothelioma (i.e. an average claimant getting less than $3,000 - before legal costs).

A source would be helpful here too. Is it because the judge ultimately only found them liable for a total of $175M? Or did the judge find them liable for more but was only able to find $175M in actual money to pay out with?