The ongoing legal battles surrounding Johnson & Johnson’s (J&J) talc litigation have taken a new turn with implications for attorney-client privilege. Plaintiffs’ attorneys argue that J&J improperly transferred assets and exploited the bankruptcy process, invoking the crime-fraud exception to potentially access J&J’s internal legal communications. This move, if granted, could provide insights into J&J’s strategies to mitigate liability and address approximately 61,000 talc-related lawsuits.
Critics, including six plaintiffs’ law firms, allege that J&J engaged in fraudulent attempts to sidestep liability through bankruptcy filings by its subsidiary, LTL Management. These firms have initiated a class action in New Jersey federal court, pushing for disclosure of communications among J&J’s top lawyers. This legal maneuver comes amid J&J’s efforts to secure an $11 billion global settlement deal and its third attempt at a divisional merger bankruptcy strategy, often referred to as the “Texas Two-Step” (learn more about the Texas Two-Step).
Judicial opinions are split on the viability of the crime-fraud exception in this context. Legal academics such as Bruce Markell, a former bankruptcy judge, acknowledge the complexity and potential viability of this approach but also recognize the high threshold courts typically uphold for breaching attorney-client privilege (see court filing). Still, plaintiffs argue that the alleged fraudulent behavior behind J&J’s bankruptcy bids justifies their request.
J&J, represented by Erik Haas, its worldwide head of litigation, has accused the plaintiffs’ firms of employing abusive litigation tactics designed to prolong proceedings and achieve extreme judgments. This counter-allegation forms part of J&J’s broader strategy to disqualify some of the leading plaintiff attorneys and issue subpoenas for their communications with third parties, including litigation funders and media outlets (latest court filings).
The ongoing legal battle encapsulates a broader debate over the ethics and legality of using bankruptcy to manage mass tort liabilities. Stephen Lubben of Seton Hall Law School considers the fraud suit an interesting but challenging effort, while other scholars like Anthony Casey from the University of Chicago Law School have criticized the invocation of the crime-fraud exception as “laughable” and “frivolous” (read more).
As the eight-week voting window for plaintiffs on the proposed settlement approaches, with a requirement for 75% support by July 26, the litigation continues to evolve. Both sides intensify their efforts, navigating complex legal and strategic landscapes. The stakes remain high for J&J, which seeks to finalize a settlement and bring closure to over a decade of litigation crises (case details).