Consumers don't know the Texas Two-Step

We use "Band-Aid" even in contexts that are not about a cut and bleeding.  Like, when we criticize public policies as nothing but a Band-Aid on the problem.  It is so much a part of our social vocabulary that we forget that Band-Aid is like Xerox--a very specific product that is trademarked.

Band-Aid was invented and made popular by a huge multinational company, Johnson & Johnson.  It is one of the few companies that constitute the Dow Jones Industrial Average, aka the Dow.  Its product range is vast.  How vast?

There's a lot more to what J&J produces--those are merely familiar examples.

Notice the "But" at the end of that excerpt?  There's always a "but" that tells us, as Paul Harvey used to say, the rest of the story.  In the case of Johnson and Johnson, the "but" that is the crux of this New Yorker essay is this: "But what few of those consumers grasped until a series of baby-powder cases began to go to trial was that, for decades, the company had known that its powders could contain asbestos, among the world’s deadliest carcinogens."

One cannot put a Band-Aid over such a problem in which a product has a known carcinogen.  A problem that J&J has known for years.

The company has known all along, but consumers have been aware of it only for a few years.  This is "information asymmetry," which is one of the concepts that I understood in graduate school.  In market economics, we refer to the warning caveat emptor--buyer beware.  But, what if the buyer simply has no clue about carcinogens that a powerful multinational company has known all along?

We consumers are screwed.  That's the simple bottom-line.

Think about the fact that J&J has known for years about the carcinogen in the baby-powder it manufactured and marketed.  It couldn't care about the health effects on consumers.  And when consumers finally linked their ovarian cancers and other health issues to the product, of course J&J did not accept responsibility and discontinue the manufacture and sales of the deadly product.  Instead, the company employed an army of lawyers to fight back.

Here's the most godawful way in which J&J fought back "legally": Johnson & Johnson filed for bankruptcy.

Actually, J&J did not go bankrupt.  After all, it won't be part of the Dow then, right?  This is where the Texas Two-Step comes in.  I had no idea (meta information-asymmetry!) about this “the greatest innovation in the history of bankruptcy” until I read the essay:

The company that did so was called LTL Management L.L.C. LTL, which stands for Legacy Talc Litigation, was created in Texas on October 11, 2021, and merged on the following day with—let’s call it Old J. & J. That same day, LTL Management was converted to a limited-liability company based in North Carolina, and two days after that, on October 14th, it filed for Chapter 11 protection in the U.S. Bankruptcy Court in Charlotte.

The L.L.C. that Johnson & Johnson created never had an office or any employees of its own in Texas or North Carolina. It never manufactured or sold talcum powder; for that matter, it never really conducted any business at all before going belly up. Still, in between its formation in one business-friendly jurisdiction and its bankruptcy in another, the new company took on all of Old J. & J.’s talc liabilities. It was suddenly responsible for some forty thousand talc cases, while a new company, also called Johnson & Johnson Consumer Inc., emerged with all of Old J. & J.’s assets—those tens of billions of dollars—and none of its talc liabilities, leaving it free to carry on with its operations.

The bankruptcy route taken by Johnson & Johnson, formally called a divisional merger, is better known as the Texas two-step.

This bankruptcy shell-game is being challenged in higher courts.  But,

[Many] companies are exploring strategic bankruptcy as a cheaper, faster way out of mass torts. 3M recently tried to move tens of thousands of lawsuits filed by veterans over its allegedly defective Combat Arms Earplugs into bankruptcy after three years of litigating the cases in an M.D.L. Bayer could decide that bankruptcy court is a better way out of the long-tail liability it faces from its product Roundup, which contains glyphosate, a chemical that plaintiffs claim has been linked to non-Hodgkin’s lymphoma.

I do not understand how the executives in-charge of such decisions go to sleep at night fully knowing that they sell products that kill.  And there are lawyers in plenty who not only defend these bastards but also come up with more novel legal schemes.  May all of them be tortured to the maximum when they go to hell that their religions warn them about.

Johnson & Johnson’s most recent quarterly report shows twenty-four billion dollars in sales, and, in the eleven months since it filed for bankruptcy, an average of one woman a day has died waiting to find out if her case against the company would ever be heard.

As an individual consumer, what can I possibly do?  Here's a listing of some of the J&J products that I use: Tylenol, Imodium, Neosporin, Motrin, Zyrtec, Listerine.  I suppose I could buy the generic versions of these, or buy competitors' products. But, I am aware that there are no saints among the multinational corporations that sell us everything from paper towels to automobiles.

I have only one option: Elect people who will go after these bastards.

Here we go again. Another giant corporation is abusing our bankruptcy system to shield its assets and evade liability for the harm it has caused people across the country. We can’t keep letting this happen and I have a bill to stop it. https://t.co/OTKdBmomSZ

— Elizabeth Warren (@SenWarren) October 15, 2021

Your vote, too, has consequences.

(Readers in India need to note that J&J continues to sell talc-based baby powder in India, despite discontinuing in the US and Canada.)