OP is spinning this as an attempt by J&J to escape paying out the liability which it wasn’t - Matt Levine (of course!) explains the details here: https://www.bloomberg.com/opinion/articles/2023-01-31/matt-l...
Must be nice, being able to say "Well, we'll give LTL $X and that can be used for settlements" while still throwing off nearly $X a year in profits, and 25% of X in shareholder dividends alone.
Why should a company be allowed to set and determine how much liability it needs to pay?
Sure, it's a higher number than J&J asked for, but it's still a number!
The entire purpose of bankruptcy is to resolve debt you can't afford to pay.
Georgia Pacific, faced with several billions in claims, formed a subsidiary, and "pledged" to fund it to the full amount, starting with an initial $1B funding...
Actually only funded it to the value of $175M. Less than $3,000 per claimant for mesothelioma.
Less than $3,000... before claimant legal fees.
If you think he’s wrong, please explain why. I genuinely would love to hear a well-reasoned critique of his analysis.
It seems more fair to allow any and all claimants to sue J&J, or join together for a class action lawsuit. If the liabilities outstrip the company's total worth they can then go for bankruptcy of the entire J&J business and split assets proportionately across all liabilities.
Except that's not what they did. As the article explains, under the J&J agreement the "maximum liability" of the parent to the subsidiary was defined as the entire cash value of the parent.
For example, by avoiding bankruptcy any existing liabilities aren't pooled and paid out proportionately along with the lawsuit proceedings. There is also nothing stopping the parent company from moving around funds to limit its "entire cash value".
This is not what they did.
To quote Levine's piece:
> the box where J&J put its talc claims — could draw at least $61.5 billion from J&J to pay off those claims. The point here, the bankruptcy court concluded, was not to keep J&J from having to pay talc claims; the entire value of J&J’s consumer business was still on the line for those claims.
For emphasis: the entire value of J&J’s consumer business was still on the line for those claims
Which is why the judge dismissed the bankruptcy proceedings.
There's more nuance though than that.
> Moreover, New JJCI has agreed to fund the Debtor LLC’s Chapter 11 case and contribute $2 billion into a settlement trust for the benefit of the talc claimants as part of a Chapter 11 reorganization plan.
$2B = a lot less than $61.5B. And you can guarantee that J&J (who refiled the bankruptcy proceeding within 3 hours of it being dismissed) will fight that vehemently.
I like Matt Levine's reporting, but you'll forgive people for taking Bloomberg taking a pro-business position with more than a little grain of salt.
The CEO and eveyone near him is rich, they company going out of business won't affect them. I'm sure they'll be able to get high paying jobs. In fact the negative association with this case would have me wanting to move on
If it's just a fine then the money is like fee to do something and remember that it's not always caught.
Imagine if the punishment for murder was $1 million dollars and only if I'm caught.
Isn't the alternative of directly attacking j&js resources made fantastically harder and more uncertain? The net effect of which is to make claimants more likely to choose the safe path of accepting the figure chosen by the guilty party rather than letting judge or jury directly decide.
It would different if the court themselves attempted to limit liabilities. If I could limit the cost of my liabilities, you could sure that I’d discount them to the detriment of those that owned the liabilities.