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Durbin Delivers Opening Statement During Senate Judiciary Committee Hearing on Corporations Evading Accountability by Manipulating Bankruptcy

Witnesses include the head of worldwide litigation at Johnson & Johnson, which has attempted to use legal maneuvers to evade accountability for harm allegedly caused by its talc-based products

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today delivered an opening statement during a Senate Judiciary Committee hearing entitled “Evading Accountability: Corporate Manipulation of Chapter 11 Bankruptcy.”  This hearing will examine Chapter 11 bankruptcy law and the threat posed to consumers and others by legal maneuvers like the “Texas Two-Step.”

Key Quotes:

“In October of 2021, Johnson & Johnson faced lawsuits from nearly 40,000 Americans who had been diagnosed with ovarian cancer or mesothelioma allegedly caused by the company’s talc-based products.  Rather than defend against these claims in district court or settle with the victims, Johnson & Johnson used a legal maneuver known as the ‘Texas Two-Step’ in an attempt to skirt and limit accountability.”

“Corporate bankruptcy plays an important role in our economy.  It is meant to allow a company in financial distress to go before a bankruptcy court, agree to certain conditions, and, in exchange, get certain protections… But if a company is going to be freed from its debts, there has to be some cost.  The company has to accept the oversight of the bankruptcy court.  It has to compensate its creditors according to their interests.  It has to limit its operations during the course of the proceedings.”

“The video featured testimony from Kimberly Naranjo, a mesothelioma victim, who testified before this Committee last year and has since passed away.  We are joined today by another mesothelioma victim, Justin Bergeron, a young father still fighting to hold Johnson & Johnson accountable.  While Johnson & Johnson’s potential liability to Ms. Naranjo, Mr. Bergeron, and thousands of other Americans is substantial, it isn’t anything the company cannot handle.  At the time it executed the ‘Texas Two-Step’, the company was valued at more than $420 billion.  That year, it would make nearly $64 billion in profit.”

“These maneuvers are blatant attempts by wealthy corporations to bypass the mass tort system.  To simply decline to be held liable.  And we have every reason to expect that corporations—at least those with deep enough pockets—will continue to try to manipulate bankruptcy in similar ways.  That’s not what Congress intended when it created the bankruptcy system.  And, it’s not something we should allow to continue.”

In recent years, wealthy corporations have attempted to dodge accountability by exploiting loopholes in bankruptcy law. Companies like Johnson & Johnson and 3M have repeatedly tried to bypass the mass tort system, freezing in place hundreds of thousands of legal claims while continuing business as usual.  This trend—financially stable companies trying to obtain all of the benefits of bankruptcy without any of the costs—shows no sign of abating.

The hearing will continue the work of Chair Durbin and the Senate Judiciary Committee to close loopholes in the bankruptcy system.  Durbin has spoken out on the Senate floor and in a subcommittee hearing against Johnson & Johnson’s shameful maneuvers, following an appellate court’s ruling that rejected J&J’s bankruptcy filing but again showed the need for legislative reform.  Durbin also led an amicus brief to the Seventh Circuit Court of Appeals in February, in which he argued that Congress did not intend the bankruptcy system to be used by wealthy corporations to evade accountability.

Video of Durbin’s opening statement is available here.

Audio of Durbin’s opening statement is available here.

Footage of Durbin’s opening statement is available here for TV Stations.