--:-- [Theme music fades out]
--:-- Noel King: Attention talcum powder users. If you or a loved one used talcum powder products like Johnson's Baby Powder or Shower-to-Shower Powder and were diagnosed with ovarian cancer, you may be entitled to substantial financial compensation.
--:-- Noel King: For years, lawsuits against Johnson & Johnson have piled up. For years, the company has denied its baby powder caused cancer. And eventually, it found a way to shunt off its legal liability.
--:-- Noel King: Just this week, a panel of judges in a Philly appeals court pressed J&J over the way it went about that. Facing tens of thousands of lawsuits, the company spun off a new unit and siloed the suits into it. That unit then immediately filed for bankruptcy.
--:-- Noel King: Coming up on Today Explained, what this might mean for people seeking justice.
--:-- Noel King: I hope no woman has to go through this. It really changes your life, your family, and it should not happen to anybody.
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--:-- Noel King: Support for this show comes from Strawberry.me. Be honest. Are you happy with your job? Or are you stuck in one you've outgrown? Or never wanted in the first place?
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--:-- Noel King: It's Today Explained. I'm Noelle King.
--:-- Tiffany Hsu: I'm Tiffany Hsu, a reporter for The New York Times, and I've been covering the Johnson & Johnson's baby powder lawsuits.
--:-- Tiffany Hsu: So, it's a powder that was often used to alleviate diaper rash around infant's diaper area. That's mostly how it was marketed by Johnson & Johnson, as pure and gentle enough for baby's bottoms, a product that mothers can trust.
--:-- Tiffany Hsu: I put it on her after a bath. I put Johnson's all over her. Fragile. Handle with Johnson.
--:-- Tiffany Hsu: But over time, Johnson & Johnson realized that it could also market to mothers. So it started to sell the product to women who themselves use these products to reduce feminine odors on their genitals.
--:-- Tiffany Hsu: As long as I can remember, Johnson's baby powder has been making me feel soft, fresh, and loved.
--:-- Tiffany Hsu: It was also broadly popular with adults who applied it to other parts of their bodies to soothe rashes or ease chafing caused by friction on the skin.
--:-- Tiffany Hsu: The substance that is at the center of these lawsuits is something called talc.
--:-- Tiffany Hsu: What's talc and what's the problem with it?
--:-- Tiffany Hsu: Talc is, as we usually come into contact with it, a powder. But it's derived from talcum that is mined from geological deposits, usually deep in the earth.
--:-- Tiffany Hsu: It is known as the softest mineral that is known to man. It's the softest there is.
--:-- Tiffany Hsu: Don't you like how it makes my skin feel so smooth and soft?
--:-- Tiffany Hsu: Uh-huh.
--:-- Tiffany Hsu: How did we come to understand talc and cancer have a relationship?
--:-- Tiffany Hsu: So researchers started raising concerns decades ago, some of them in the 1950s. Consumer advocates grew increasingly alarmed in the 1970s because there were studies that started to suggest that there might be a link between talc and the carcinogen asbestos.
--:-- Tiffany Hsu: So there are a few theories of how talc might lead to cancer. One, and this has gained traction with plaintiff's lawyers in recent years, is that talc can be contaminated with asbestos, which is a known carcinogen that is associated with mesothelioma, a cancer of the lining of the internal organs.
--:-- Tiffany Hsu: So talc mines are often located near asbestos deposits. And as a result, the geologists that we've talked to have said that raw talc can be intermingled with asbestos.
--:-- Tiffany Hsu: Cosmetic grade talc is refined usually to remove impurities, but the government doesn't enforce whether or not that happens.
--:-- Tiffany Hsu: The other theory is that when a woman applies talcum powder to her genital area, small particles can migrate up the vaginal canal and travel to the epithelial ovarian tissue or the fallopian tubes.
--:-- Tiffany Hsu: And the thought is that this could cause irritation that sets off chronic inflammation, and that eventually contributes to cancer.
--:-- Tiffany Hsu: Back in 2018, my colleague Ronnie Rabin and I reported that Johnson & Johnson had known for decades that asbestos was a potential concern, while they were trying to discredit researchers who said as much.
--:-- Tiffany Hsu: At the same time, Lisa Girion at Reuters found that the company didn't tell the FDA that at least three tests by three different labs in the 1970s had found asbestos in its talc, in one case that the levels were, quote, rather high.
--:-- Tiffany Hsu: Is there any replacement for talc?
--:-- Tiffany Hsu: Indeed, there is. After consumer advocates began saying that talc can train traces of asbestos, Johnson & Johnson developed a cornstarch version in 1980 and began selling it.
--:-- Tiffany Hsu: No baby powder absorbs better than Johnson's baby pure cornstarch powder.
--:-- Tiffany Hsu: Okay, so 1980, they begin selling it. Why are we talking about this in 2022?
--:-- Tiffany Hsu: It's more what didn't happen. Johnson and Johnson has always been adamant that its baby powder is asbestos free and that there really is no reason why it should have to take the talc baby powder off the market.
--:-- Tiffany Hsu: Johnson Johnson is a company that's built on trust and for it to remove talc from the shelves would suggest to many people that it was somehow at fault that it was somehow admitting that there was something wrong with its product.
--:-- Tiffany Hsu: All right. So let me ask you about how marketing changes over time.
--:-- Tiffany Hsu: Cancer is something that scares people. People tend not to buy products that might give them cancer unless they are addicted to them, like cigarettes.
--:-- Tiffany Hsu: So I imagine Johnson & Johnson has to start marketing its baby powder to people who are not aware of the complaints about cancer.
--:-- Tiffany Hsu: How did Johnson & Johnson change who they marketed to over time?
--:-- Tiffany Hsu: So Johnson & Johnson has been accused of targeting its marketing to Black women for decades, really, using free samples at beauty salons, radio campaigns, other efforts.
--:-- Tiffany Hsu: In 1992, there is an internal memo that notes the, quote, high usage of baby powder among Black women and the, quote, opportunities to grow the franchise among the demographic, despite the fact that that same internal memo also notes the, quote, negative publicity from the health community on talc.
--:-- Tiffany Hsu: Well, big news for renowned civil rights attorney Ben Crump. He has filed a lawsuit on behalf of a group of Black women against Johnson & Johnson.
--:-- Tiffany Hsu: I don't know a Black woman alive back in the day that didn't use Johnson & Johnson talcum powder. If you took a bath, you was going to put some talcum powder on your body at some point, even kids when we were kids as well.
--:-- Tiffany Hsu: That's right.
--:-- Tiffany Hsu: Last year in July, the National Council of Negro Women filed a lawsuit against Johnson & Johnson saying that the company had marketed its talc baby powder to Black people through promotions at concerts, churches, and barbershops.
--:-- Tiffany Hsu: They doubled their efforts in marketing to black women. And that is what is so sinister about it.
--:-- Tiffany Hsu: The company had considered signing Patti LaBelle or Aretha Franklin as a spokeswoman, despite the evidence that its products might contribute to cancer.
--:-- Tiffany Hsu: 50 years of misinformation. That's what we're fighting. This is infuriating.
--:-- Tiffany Hsu: Where are the regulators?
--:-- Tiffany Hsu: That is an excellent question.
--:-- Tiffany Hsu: There are asbestos regulations at the federal, state and local levels of government, but talc is not regulated by any government agency.
--:-- Tiffany Hsu: The cosmetics industry handles monitoring of its own use of talc, and by many accounts, it doesn't do a particularly rigorous job of it.
--:-- Tiffany Hsu: Traces of asbestos have been found in talc makeup products that are marketed to kids and teens.
--:-- Tiffany Hsu: The FDA is now warning parents to throw out three products from Claire's after new tests found they contained asbestos. As well as in some toys and crayons containing the powder. Play school crayons tested positive for asbestos.
--:-- Tiffany Hsu: Tell me what we know about how many people claim they've gotten sick from using baby powder.
--:-- Tiffany Hsu: And I imagine many of them are women, if not most of them. And how many lawsuits have been filed?
--:-- Tiffany Hsu: So at this point, we have more than 40,000 lawsuits.
--:-- Tiffany Hsu: Many of them are from women with ovarian cancer or mesothelioma.
--:-- Tiffany Hsu: There are some men as well. And they've accused Johnson & Johnson of selling talc baby powder while being aware of its links to health risks such as possible asbestos contamination.
--:-- Tiffany Hsu: Ronnie and I spoke to many, many victims. There's one example that stands out for me in particular. Pat Schmitz was a former school teacher who said she trusted baby powder because Johnson & Johnson told her it was safe.
--:-- Tiffany Hsu: And this is a common refrain from plaintiffs that they trusted the company.
--:-- Tiffany Hsu: And then Pat was diagnosed with mesothelioma. This is a cancer that's usually found among construction crews, shipyard workers and coal miners.
--:-- Tiffany Hsu: I used body powder after every bath and shower. Baby powder or the body powder served the purpose of not chasing.
--:-- Tiffany Hsu: How did you plot? Sometimes I applied it to my hand and would apply it to my body.
--:-- Tiffany Hsu: And she was angry. She was so angry that she decided to sue despite knowing that she didn't have much time left.
--:-- Tiffany Hsu: She used to be healthy and robust, but when I met her, she was frail and withered.
--:-- Tiffany Hsu: A judge ordered the company to pay her $4.8 million, and that same year she died, and she was 61.
--:-- Tiffany Hsu: There's another woman named Deanne Berg who says that she turned down a $1.3 million settlement offer from Johnson & Johnson because she wanted to force the company to put warning labels on baby powder or stop selling it entirely.
--:-- Tiffany Hsu: She used talc baby powder for 40 years, and she developed ovarian cancer in 2006.
--:-- Tiffany Hsu: I am 100% certain that it caused my cancer.
--:-- Tiffany Hsu: And what she told me was heartbreaking. You know, she said she endured, quote, brutal chemotherapy for six months.
--:-- Tiffany Hsu: She said she sustained permanent hearing loss, nerve damage, anemia, and depression.
--:-- Tiffany Hsu: And the last time I talked to her, she was in remission, thankfully.
--:-- Tiffany Hsu: Surely Johnson and Johnson is no longer selling talc based baby powder. They've they've got like a new product on the market that they can point to.
--:-- Tiffany Hsu: This has been a long road. It hasn't happened as quickly as one might think.
--:-- Tiffany Hsu: Uh, in 2019 retailers like Walmart and CVS and Rite Aid pulled Johnson Johnson's talc baby powder because the FDA had found asbestos in a container of the product.
--:-- Tiffany Hsu: This was a part of a 33,000 bottle batch that Johnson & Johnson voluntarily recalled after the FDA made its discovery.
--:-- Tiffany Hsu: In 2020, Johnson & Johnson said that it would discontinue sales of talc baby powder, but only in the U.S. and Canada.
--:-- Tiffany Hsu: It said it would keep selling it elsewhere.
--:-- Tiffany Hsu: In a statement, the company blaming declining sales fueled by misinformation around the safety of the product and a constant barrage of litigation advertising.
--:-- Tiffany Hsu: In April of this year, Johnson & Johnson's shareholders voted against a proposal that would have stopped the sales of talc baby powder in global markets like Asia and South America.
--:-- Tiffany Hsu: Then there was a campaign with nearly 200 organizations. It was led by the Black Women for Wellness to pressure J&J to strip the talc-based products from shelves worldwide.
--:-- Tiffany Hsu: And finally, in August, the company said it would stop selling the product globally in 2023.
--:-- Tiffany Hsu: The company maintains talc-based powder is safe, but says it's making a switch to cornstarch-based powder next year to meet customer needs and evolving global trends.
--:-- Tiffany Hsu: There is nothing that forces the hand of a company like having to pay out money to people who claim their product has injured them.
--:-- Tiffany Hsu: How much has Johnson & Johnson had to pay out in all these lawsuits?
--:-- Tiffany Hsu: So the verdicts have been varied.
--:-- Tiffany Hsu: In 2018 there was a jury in Missouri that ordered Johnson Johnson to pay nearly billion to 22 women and their families.
--:-- Tiffany Hsu: And those people had claimed that asbestos in the talc had caused them to develop ovarian cancer.
--:-- Tiffany Hsu: But it should be said that Johnson & Johnson has been cleared in several cases and it's successfully appealed to others.
--:-- Tiffany Hsu: But the cases have still been very damaging financially and reputationally.
--:-- Tiffany Hsu: In Johnson & Johnson's financial reports, it says that it faced $1.6 billion in talc-related litigation expenses last year.
--:-- Tiffany Hsu: And this was after setting aside $3.9 billion for legal bills the year before.
--:-- Jamie Smith: Coming up, as the lawsuits mounted, Johnson & Johnson made a seemingly dubious, but still legal move to get itself off the hook.
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--:-- Jamie Smith: The question you'll be asking yourself is, why go anywhere else?
--:-- Jamie Smith: Broughton. Deals. Brands. Wow. It's a feeling you never outgrown.
--:-- Jamie Smith: Johnson's baby powder is a feeling you never outgrown. Pure Johnson's baby powder from Johnson & Johnson. It's a feeling you never outgrown.
--:-- Jamie Smith: It's Today Explained.
--:-- Jamie Smith: Jamie Smith is the U.S. pharmaceutical correspondent for the Financial Times, and he's been writing about how Johnson & Johnson is trying to get out of paying these big legal fees using the Texas two-step.
--:-- Jamie Smith: The Texas two-step is really the catchy name that lawyers and the media have come up with to describe what's a very complex and controversial bankruptcy maneuver.
--:-- Jamie Smith: This is really at the center of J&J's response to the multibillion-dollar baby health problem that it faces.
--:-- Jamie Smith: What can I tell you about the Texas Two-Step?
--:-- Jamie Smith: I mean, it's a scheme that gets its name from the use of a statute which was passed in Texas back in 1989.
--:-- Jamie Smith: You know, it was originally intended to make the process of spinning off companies more efficient.
--:-- Jamie Smith: And it was part of a push by local business leaders and lawyers at the time in Texas to make it a much more business-friendly jurisdiction.
--:-- Jamie Smith: But it certainly is controversial or has become controversial even down in Texas.
--:-- Jamie Smith: As the name suggests, there's really two parts to this scheme.
--:-- Jamie Smith: The first is a corporate reorganization which enables a company to split itself into two separate entities.
--:-- Jamie Smith: Now in J&J's case, it created a new subsidiary called LTL Management and it stuffed it with all the potential legal liabilities related to the almost 40,000 personal injury claims that have been filed against it by plaintiffs.
--:-- Jamie Smith: LTL then, when it was created through this process, it immediately filed for bankruptcy protection in North Carolina.
--:-- Jamie Smith: Listen, I got the answer. You declare bankruptcy, all your problems go away.
--:-- Jamie Smith: A move that automatically halted all the personal injury cases that it faced and it prevents claimants from moving ahead towards jury trials.
--:-- Jamie Smith: It's a fresh start. It's a clean slate. Like the Witness Protection Program.
--:-- Jamie Smith: Exactly. Not at all.
--:-- Jamie Smith: So that's the one part of this process.
--:-- Jamie Smith: And the other part is that there's also the valuable parts of Johnson & Johnson, which has all its drug, pharmaceutical business, its medical device business and its consumer business.
--:-- Jamie Smith: And these were all placed into a separate entity outside of the bankruptcy process.
--:-- Jamie Smith: And so essentially, Johnson & Johnson was reborn without the threat of the talc litigation hanging over the good parts of its operations.
--:-- Jamie Smith: I declare bankruptcy!
--:-- Jamie Smith: And Johnson & Johnson and the good parts of its operations without the threat of the lawsuits, is that a profitable company? Is that a rich company?
--:-- Jamie Smith: Oh, Johnson & Johnson is a hugely profitable and rich company.
--:-- Jamie Smith: So Johnson & Johnson has a market capitalization of about $440 billion.
--:-- Jamie Smith: So it's one of the US's biggest listed companies, one of the biggest healthcare products companies in the world.
--:-- Jamie Smith: And that goes to the heart of the arguments that the plaintiffs have been making in all the appeals we've had against this is that Johnson & Johnson shouldn't be allowed as such a big, powerful, profitable company to use the bankruptcy system to handle these personal injury claims.
--:-- Jamie Smith: Is the Texas two-step considered a shady move among business journalists and business professionals? Or is this something that companies do all the time when they don't want to face the music?
--:-- Jamie Smith: Well, the Texas Two-Step is a complex and certainly very controversial move.
--:-- Jamie Smith: I don't think we can call it a shady move yet certainly not until the legal processes are over dealing with this.
--:-- Jamie Smith: The Texas Two has already gone through one court case in the Bankruptcy Court of New Jersey.
--:-- Jamie Smith: And that court found that it was a perfectly legitimate move for Johnson & Johnson to use the bankruptcy process in this way to handle its personal injury claims.
--:-- Jamie Smith: However, we have an appeal against that by the TELC claimants, and we'll get a decision on that, and that will certainly get to the heart of whether it is a legitimate process to use.
--:-- Jamie Smith: During my reporting on the Texas Two-Step, I went down to Texas and tracked down a lawmaker who introduced the divisional merger scheme into the state legislature back in 1989.
--:-- Jamie Smith: And he said he was appalled at J&J's use of the scheme to try and manage its exposure to these TELC claims.
--:-- Jamie Smith: So that was Stephen Wallens, a former Texan lawmaker.
--:-- Jamie Smith: And he told me that J&J had dubiously interpreted and misused the divisional merger law to avoid liabilities.
--:-- Jamie Smith: And they would never have proposed this divisional merger law in the first place if they had known that it would have been used in such a way.
--:-- Jamie Smith: What are some other companies that have used the Texas two-step to avoid litigation? Any household names?
--:-- Jamie Smith: Yeah, well, there are three other Texas two-step cases. Koch Industries, Georgia Pacific, first deployed this scheme back in 2017.
--:-- Jamie Smith: Train technologies and a US unit of the France-based company Saint-Gobain followed suit.
--:-- Jamie Smith: All these cases are actually linked to asbestos-related lawsuits, and none of them have yet been finalized or settlements successfully paid out to claimants.
--:-- Jamie Smith: So it's a scheme that it's just got four sort of examples of it taking place at the minute.
--:-- Jamie Smith: But most experts believe that if J&J are successful in their efforts to use it, that it could actually draw in many other companies to go ahead and use it.
--:-- Jamie Smith: And I wonder, are these companies just individually deciding to do this or is there a connection among and between them?
--:-- Jamie Smith: The Texas Two-Step has really been driven by a bunch of smart lawyers at the law firm Jones Day.
--:-- Jamie Smith: It's one of the biggest law firms in the country.
--:-- Jamie Smith: It turned over just over 2.2 billion in revenues in 2020.
--:-- Jamie Smith: And each of its equity partners took home on average about $1.3 million that year.
--:-- Jamie Smith: So its lawyers really devised and marketed this complex scheme.
--:-- Jamie Smith: And one of them, Greg Gordon, who's a Jones Day partner at the firm's Texas office, described this year in a public forum the Texas two-step as, I quote, the greatest innovation in the history of bankruptcy.
--:-- Jamie Smith: And it's not surprising that Jones Day believed that because, you know, they've been reaping millions of dollars in bankruptcy fees through this.
--:-- Jamie Smith: You said that earlier this year, a federal judge in New Jersey essentially said Johnson & Johnson can do this.
--:-- Jamie Smith: What was the judge's justification?
--:-- Jamie Smith: That's right. Judge Michael Kaplan of the New Jersey Bankruptcy Court argued that the bankruptcy courts were the best venue to handle these mass tort claims because they could provide an expeditious, fair and less costly method of settling the claims.
--:-- Jamie Smith: So he argued J&J did not file in bad faith, but rather for the legitimate purpose of settling these types of mass litigation.
--:-- Jamie Smith: And how did the lawyers for the victims or the alleged victims and their advocates respond to this?
--:-- Jamie Smith: I imagine they were disappointed.
--:-- Jamie Smith: Yes, the victims were very disappointed and the advocates were very angry.
--:-- Jamie Smith: So actually, what we're seeing is they have already filed an appeal against Judge Kaplan's ruling.
--:-- Jamie Smith: And they are challenging this at the federal appeals court.
--:-- Jamie Smith: If this case is thrown out, then I think companies will really think twice about going down the bankruptcy route.
--:-- Jamie Smith: But if J&J and LTL are able to win this case, I think it really will set a precedent for the future.
--:-- Jamie Smith: Let me ask you lastly, Jamie, Johnson & Johnson does have a reputation For a long time, it was a reputation for trustworthiness.
--:-- Jamie Smith: And surely it wants to protect its reputation.
--:-- Jamie Smith: Does something like the Texas two-step, with all of the dubiousness therein, hurt its reputation?
--:-- Jamie Smith: Or has it already been damaged enough by the lawsuits, the thousands of lawsuits against it?
--:-- Jamie Smith: J&J talks a lot about its credo, you know, a set of values that it conducts its business by, and which actually stipulates that its first responsibility is towards its customers.
--:-- Jamie Smith: And I think inevitably by resorting to a complex, controversial legal scheme to handle these types of sensitive claims over the baby talc, well, that means it is enduring some reputational damage.
--:-- Jamie Smith: Whether this is any worse than having thousands of cases coming to court, decided by a jury with huge awards gathering media attention is really anyone's guess.
--:-- Jamie Smith: I think the big danger for J&J is that if it loses its appeal or the appeal against this Texas two-step case, it may have to go back into the mass tort system and face these jury trials anyway after already enduring the reputational damage from going down the route of the Texas two-step.
--:-- Jamie Smith: So I think the company will certainly be suffering some sort of reputational hit through this.
--:-- Noel King: Thank you.
