Johnson & Johnson is facing a lawsuit filed by people living with cancer alleging the healthcare company of committing fraud by its repeated use of a shell company's bankruptcy to resolve tens of thousands of lawsuits that allege its talcum products contain the carcinogenic substance asbestos. 

Reuters reported that at least five plaintiffs filed the lawsuit on Wednesday (May 22) in a New Jersey federal court on behalf of over 50,000 people suing the company for its talc products. 

Johnson & Jonson Sued Over Bankruptcy Strategy

The group alleged that Johnson & Johnson's strategy deliberately held out billions of dollars from the plaintiffs in an attempt to "hinder, delay, and defraud" the people living with cancer, thus preventing them from being sued in court. 

The plaintiff's legal counsel, Mike Papantonio, claimed that the company was "playing a dark game of chess" by circumventing the United States' financial and judicial systems to prevent it from settling with its clients.

On the other hand, J&J's litigation chief Erik Haas told USA TODAY that the lawsuit was a "Hail Mary" passed by the plaintiff's lawyers, who do not want their clients to vote on the company's latest proposed bankruptcy settlement.

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J&J's Use of 'Texas Two-Step'

Women who developed ovarian cancer and people with mesothelioma, a fatal cancer associated with asbestos exposure, have filed the majority of the talc lawsuits against Johnson & Johnson.

However, J&J maintained that its baby powder and talc products were safe, did not contain asbestos, and did not cause cancer. 

Reuters added that the company has been using the corporate strategy called "Texas two-step" to place its talc liabilities into a new subsidiary that then filed for bankruptcy in 2021. This stopped the lawsuits from moving ahead against J&J, although it did not file for bankruptcy itself. 

The company made at least two bankruptcy attempts to delay and deny the plaintiffs' claims, with a third one planned once it received enough votes to support a $6.48 billion talc settlement. 

Meanwhile, the plaintiffs of Wednesday's lawsuit sought to rule the "Texas two-step" transaction as fraudulent, claiming that the company was using it to primarily shelter J&J's assets from the talc litigation.

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