Designing Designer Bankruptcy

58 Pages Posted: 27 Feb 2023

See all articles by Michael Francus

Michael Francus

University of Notre Dame - Notre Dame Law School

Date Written: February 21, 2023

Abstract

Today's mass torts are headed to bankruptcy. Be it Purdue Pharma's opioids, United States of America (USA) Gymnastics' sexual abuse, Pacific Gas and Electric Company's (PG&E) wildfires, or Johnson & Johnson's talc, masstort defendants have determined that bankruptcy-not class actions, multidistrict litigation, or one-off state suits-is the way to manage their mass-tort liability. But today's mass-tort bankruptcy is not the mass-tort bankruptcy of yesteryear, when the whole business filed for bankruptcy. Instead, these modern mass-tort bankruptcies are designer bankruptcies, where the defendant uses its corporate structure to choose which assets and which liabilities enter bankruptcy. To take today's marquee example, Johnson & Johnson, facing 38,000 tort suits alleging that its talc caused cancer, put those tort liabilities into a distinct limited liability company and had that company file for bankruptcy. Meanwhile, the remainder of Johnson & Johnson, including the division responsible for talc, continued to operate normally, staying outside of bankruptcy entirely.

Keywords: bankruptcy, Chapter 9, health law, local government

Suggested Citation

Francus, Michael, Designing Designer Bankruptcy (February 21, 2023). Available at SSRN: https://ssrn.com/abstract=4366170 or http://dx.doi.org/10.2139/ssrn.4366170

Michael Francus (Contact Author)

University of Notre Dame - Notre Dame Law School ( email )

Eck Hall of Law
Notre Dame, IN 46556
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
206
Abstract Views
635
Rank
308,520
PlumX Metrics