The U.S. Department of Justice, through its bankruptcy watchdog, the U.S. Trustee, has raised an objection to Johnson & Johnson’s subsidiary, Red River Talc LLC, hiring Jones Day as its bankruptcy counsel. The objection, filed in the U.S. Bankruptcy Court for the Southern District of Texas, centers on an alleged conflict of interest involving Jones Day’s previous legal role for the company.
Jones Day is known for its involvement in the “Texas Two-Step” strategy — a legal maneuver designed to help corporations address massive personal injury claims through bankruptcy proceedings. This tactic has been pivotal in reallocating tort liabilities within corporate structures to facilitate bankruptcy-driven resolutions.
The Justice Department views the situation as problematic because the firm, having been integral in implementing the tactic that distributed the mass tort liabilities to Red River Talc LLC, should not also serve as counsel as the subsidiary navigates Chapter 11 bankruptcy. The filing highlights the potential for conflicts arising from Jones Day representing both sides of this transaction, according to the DOJ’s formal objection available via Bloomberg Law. For further details, the full filing can be accessed through Bloomberg Law.
Such cases reflect the complexities in legal strategy where potential conflicts must be critically assessed, especially when legal counsel is involved in structures that later challenge the very liabilities it helped configure.