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Comment by walterbell | Hacker News Reader

J&J has $15B in penalties, but has an innovative legal strategy, https://www.esquire.com/news-politics/politics/a41191693/joh... & https://www.newyorker.com/magazine/2022/09/19/johnson-johnso...

> Deploying a legal maneuver first used by Koch Industries, Johnson & Johnson, a company valued at nearly half a trillion dollars, with a credit rating higher than that of the United States government, declared bankruptcy. Because of that move, the fate of forty thousand current lawsuits and the possibility of future claims by cancer victims or their survivors now rests with a single bankruptcy judge in the company’s home state, New Jersey.

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https://www.investopedia.com/texas-two-step-bankruptcy-defin...

Why would a non corrupt judge allow this “transfer of liabilities”?

> In June 2021, one such lawsuit resulted in an appeals court in Missouri ordering the company to pay $2.1 billion to the claimants. Later that year, the company used a divisive merger to create a new subsidiary called LTL Management LLC, transferring its talcum-related liabilities to that subsidiary along with a $2 billion trust intended to provide funding for any potential future claims against LTL.

The maneuver can be pierced if the plaintiffs prove that the subsidiary was undercapitalized.

So, a non-corrupt judge may allow this if the maneuver is genuinely done for accounting / management / etc. reasons and the new subsidiary has sufficient capital to cover the liabilities.

A non-corrupt judge may also "allow" it if the plaintiffs never attempt to pierce the veil in the first place. Like a lizard casting off its tail, this may be enough to appease the lawyers representing the class. With the issue never getting to the judge, the judge never has enough information to disallow it.

> the maneuver is genuinely done for accounting / management / etc. reasons

What sort of reasons could those be? I don't see any reason for those types of maneuvers besides trying to sidestep some amount of liability.

If we frame it as a maneuver that's associated with / driven by a major liability, then that sort of begs the question.

However, generally, companies may spin brands off for reasons such as: https://www.finra.org/investors/insights/splitting-differenc...

Are these reasons sometimes convenient covers for what is really an attempt to avoid liability? Of course, and probably fairly often.

Because justice is blind. Don’t you love the platitudes that only seem to benefit the establishment?

another win for the ratings agencies...

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