A subsidiary of Johnson & Johnson (J&J) is looking at bankruptcy protection to deal with product claims saying that the move was meant to resolve current and future claims on its product. The company said that it would fund the subsidiary for amounts that the bankruptcy courts decide in addition to creating a $2 billion trust. Thousands of lawsuits were filed by customers who say that their products cause cancer. As a result, J&J pulled out its talc-based products in North America last year.
Protecting Your Business
There are several ways to protect your business against a possible product liability lawsuit. Continuous product testing even after the goods hit the markets is one strategy allowing you to identify against defects that may cause harm or injury. In addition, many of the hazards and risks can be avoided during the design phase of the product. Plus, performing safety reviews help so that warnings and labels are added on products.
It is also in a company’s interest to hire a competent and experienced legal team for defense concerning product liability concerns and issues. Legal counsel can reduce the risks for the company and its products by providing the appropriate guidance. Product liability insurance is also a great idea that can offer a company cushion in times of litigation.
Chapter 11 or 13 Bankruptcy
J&J took advantage of an oddity in Texas state law and created a new company called LTL Management LLC (LTL). It put all its asbestos-related liabilities and lawsuits in the firm. It then filed for Chapter 11 bankruptcy in a federal court in Charlotte, North Carolina. An attorney for Beasley Allen Law Firm which has worked on lawsuits against J&J said that the move was an example of how powerful and wealthy companies use bankruptcy to safeguard their profits and avoid responsibility.
J&J, on the other hand, says that the move is legitimate and is meant to ‘resolve claims in an efficient and equitable manner.’ According to the CFO Joseph Wolk, the bankruptcy courts will be the ones to decide on settlements of lawsuits. The chief legal officer of the LTL also issued a statement saying that they are confident that all parties will be treated equitably.
Product liability lawsuits can wipe out an entire business and lose confidence in a product. In the case of Johnson & Johnson, it created a new subsidiary, dumped all litigations with the company, and filed for bankruptcy.
