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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.bl

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-levine-johnson-johnson-s-jnj-bankruptcy-didn-t-work?in_source=embedded-checkout-banner https://www.bloomberg.com/opinion/articles/2023-01-31/matt-l...

wak90 3y ago
It's really odd that Bloomberg somehow reports that businesses abusing liability and bankruptcy laws is good, actually.
- medler 3y ago
  He doesn’t say it’s good. He says that’s not what’s happening. If you think he’s wrong, please explain why. I genuinely would love to hear a well-reasoned critique of his analysis.
  - flagrant_taco 3y ago
    For one thing, this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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.
    - teraflop 3y ago
      > For one thing, this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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.
      - flagrant_taco 3y ago
        That extra complexity adds room for plenty of loop holes. 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".
    - nl 3y ago
      > this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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
      - FireBeyond 3y ago
        So they weren't bankrupt, then, because they had funding available for the entirety of any 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.
      - kevinventullo 3y ago
        In your heart of hearts, do you really believe that J&J wants to make things right and pay these claimants what they’re owed, or do you think J&J is trying to minimize what they pay out by any means necessary? Note that J&J shareholders likely interpret the latter as their fiduciary duty.
        themitigating 3y ago
        Here's the problem. Who? 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
        3y ago
  - John23832 3y ago
    It allows j&j to only offer what they are willing to lose? 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.
  - mitthrowaway2 3y ago
    By his reasoning, it's J&J that should declare bankruptcy. Not create a bankrupt subsidiary.
FireBeyond 3y ago
They still are. Just indirectly. They set the amount that they were willing to fund the subsidiary to the tune of. 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?
- HDThoreaun 3y ago
  This is the opposite of what happened. The court rejected their first two step attempt for not having a high enough payout and forced the subsidiary to have a 61.5 billion dollar payout maximum.
  - thomastjeffery 3y ago
    That's not what opposite means. What's you just described is the same exact thing with extra steps. Sure, it's a higher number than J&J asked for, but it's still a number!
    - HDThoreaun 3y ago
      It's the entire value of the business, there is no higher possible number.
      - thomastjeffery 3y ago
        Of course there is! It's called "debt". The entire purpose of bankruptcy is to resolve debt you can't afford to pay.
  - FireBeyond 3y ago
    And yet in every company where the Texas Two Step has been done, funding, "requirements" etc., have been blatantly disregarded and the only ones who have been screwed over are said claimants. 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.

wak90 3y ago

It's really odd that Bloomberg somehow reports that businesses abusing liability and bankruptcy laws is good, actually.

medler 3y ago
He doesn’t say it’s good. He says that’s not what’s happening. If you think he’s wrong, please explain why. I genuinely would love to hear a well-reasoned critique of his analysis.
- flagrant_taco 3y ago
  For one thing, this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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.
  - teraflop 3y ago
    > For one thing, this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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.
    - flagrant_taco 3y ago
      That extra complexity adds room for plenty of loop holes. 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".
  - nl 3y ago
    > this approach allows J&J to determine their maximum liability by only spinning off a certain amount to the subsidiary. 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
    - FireBeyond 3y ago
      So they weren't bankrupt, then, because they had funding available for the entirety of any 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.
    - kevinventullo 3y ago
      In your heart of hearts, do you really believe that J&J wants to make things right and pay these claimants what they’re owed, or do you think J&J is trying to minimize what they pay out by any means necessary? Note that J&J shareholders likely interpret the latter as their fiduciary duty.
      - themitigating 3y ago
        Here's the problem. Who? 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
        3y ago
- John23832 3y ago
  It allows j&j to only offer what they are willing to lose? 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.
- mitthrowaway2 3y ago
  By his reasoning, it's J&J that should declare bankruptcy. Not create a bankrupt subsidiary.

FireBeyond 3y ago

They still are. Just indirectly. They set the amount that they were willing to fund the subsidiary to the tune of. 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?

HDThoreaun 3y ago
This is the opposite of what happened. The court rejected their first two step attempt for not having a high enough payout and forced the subsidiary to have a 61.5 billion dollar payout maximum.
- thomastjeffery 3y ago
  That's not what opposite means. What's you just described is the same exact thing with extra steps. Sure, it's a higher number than J&J asked for, but it's still a number!
  - HDThoreaun 3y ago
    It's the entire value of the business, there is no higher possible number.
    - thomastjeffery 3y ago
      Of course there is! It's called "debt". The entire purpose of bankruptcy is to resolve debt you can't afford to pay.
- FireBeyond 3y ago
  And yet in every company where the Texas Two Step has been done, funding, "requirements" etc., have been blatantly disregarded and the only ones who have been screwed over are said claimants. 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.