The term for this process is misleading, and the mental image is very much of a company which is getting out of paying their victims. In this case, filing for bankruptcy created fairness among victims, they did not have to be first or fifth to get the right damages, every victim was treated equal.
> That is, LTL — 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. The point, rather, was to deal with those claims in an organized and efficient way, to treat all the claimants fairly.
The only reason the court quashed it was because it wanted J&J to fight the individual or class action lawsuits, and it was too early for bankruptcy.
Try on this hypothetical. Imagine that ten people in a giant company called ACME made some decisions that led to 50,000 people getting hurt. ACME also employs 100,000 hard working people, representing perhaps 0.3-0.4 million family members dependent upon that income. Imagine further that ACME's other products have dramatically improved the lives of hundreds of millions of other people.
Given that scenario, does the ethical math really work for ACME to be completely destroyed? It is easy to see how the 10 decision makers should be punished. It is also easy to see how the people who were hurt should be compensated in some way. Destroying ACME entirely will harm lots of other people so it is not clear how to justify that. It is a very frustrating domain because we think of these companies as monoliths, but they are really just a large collection of mostly very decent people.
By not destroying the company, you are giving all sufficiently large future companies carte blanche to break all the consumer protection laws they want, and you are rewarding investors for those companies. The long term moral hazard isn’t worth it; the investors and decision makers absolutely need to be wiped out.
It's like not taking down a criminal mafia because the income of the enterprise goes to take care of at least 10x as many children, wives, dogs and cats than people who were actively committing the crimes. It's like not ordering the the proceeds of a crime be returned to the victims because the house the thief purchased with them is so beautiful, and the thief's daughter so well-behaved.
I employ thousands of men, women and children in my mines, many in the poorest and most conflict-ridden parts of the world. The gemstones we produce are some of the most highly valued products out there - what could produce more happiness than an engagement ring?
And yet despite all the good I do, when I want to hunt and kill one or two human beings for sport, apparently it's still illegal. Even when I offered to use people who were terminally ill anyway, and I offered to compensate their families appropriately.
I can only hope that in the future, our political leadership will be more rational and less emotional about these things
/s
ACME has already been compensated financially for their products, so I don't think we should count them again in the ethical calculus.
It works for the banking industry I guess so why not here too.
Too big to fail implies catastrophic harm worse than the (unpalatable) steps necessary to prop something up.
This argument is really exploring the line between “company did something harmful” and “company did something so harmful they should no longer exist”.
I’m not arguing for either, but TBTF is unrelated.
As we all know capitalism is the most efficient economic system, those 100,000 hard working people will go work for other companies. I'm sure another company that knows its products contain asbestos would love to hire the legal and PR team that has experience in suing scientists who link products to cancer.
The same ethical math tells us we should never imprison parents of young children for smaller crimes, like stealing, because it will harm wellfare of the child. And yet we do it anyway.
> Destroying ACME entirely
By carpet bombing? Sure.
But we do not blow up the factories and we don't neurolise employees. The factories will be bought by a competitor, the employees will work for a competitor or start their own business. Nothing physical is "Destroyed" in the real world
I think I don't care about J&J as long as victims are fairly compensated. For this one, and for any future victims that are affected by this product or any other product created by J&J.
It creates fairness among victims by removing their rights to seek higher damages via their own court cases.
This "fairness" is only needed if the total amount of judgements exceeds what J&J can pay. In which case it is J&J which should be declaring bankruptcy, but that would block their ability to keep paying dividends to shareholders.
> The only reason the court quashed it was because it wanted J&J to fight the individual or class action lawsuits
Exactly. The judge saw through skeezy J&J attempt to use a sham bankruptcy to avoid the large payouts that can come from jury trials.
Edit: Seriously, how can any person believe that J&J are doing this to make sure there is money to "fairly" pay all the victims while J&J is still paying some of the money that might be needed to pay victims as dividends to their shareholders. It is pretty darn extremely clear the J&J's primary goal is to reduce payouts and maximize shareholder value
How is it fair if the first victim gets 10M in damages, but the 100,000th victim does not, given each lawsuit proceeds differently? It's obviously not a race, and getting less/more damages based on the order you filed a lawsuit is surely not the best way. (Damages via settlement or decided by jury). Even in the best case scenario where every victim gets a payout, they should get equal payout for similar damages.
Also, the judge agreed with J&J's idea, but found the filing to be premature. That is even before they fought any lawsuit. Early is encouraged, premature is not. There is a distinction
> We recognize the Code contemplates “the need for early access to bankruptcy relief to allow a debtor to rehabilitate its business before it is faced with a hopeless situation.” A “financially troubled” debtor facing mass tort liability, for example, may require bankruptcy to “enable a continuation of [its] business and to maintain access to the capital markets” even before it is insolvent.
> Still, encouragement of early filing “does not open the door to premature filing.” This may be a fine line in some cases, but our bankruptcy system puts courts, vested with equitable powers, in the best position to draw it.
The problematic part would have been had the money been capped. It's not, evidently.
Then again, if you want to dissolve a company for one product, tell me what happens if tomorrow another product of theirs has some flaw, and now the victims cannot get anything for their damages?
No they didn't.
> How is it fair if the first victim gets 10M in damages, but the 100,000th victim does not, given each lawsuit proceeds differently? It's obviously not a race, and getting less/more damages based on the order you filed a lawsuit is surely not the best way
I didn't claim that was an optimal procedure. But as of yet there is no risk of J&J not being able to pay future claims. Indeed, J&J are still financially secure enough to be paying out dividends to their shareholders.
> The problematic part would have been had the money been capped. It's not, evidently.
No, the problematic part is J&J's attempt to use a sham bankruptcy to force litigants against it to to settle through a single judge rather than continuing with regular court cases.
As I have said elsewhere, if bankruptcy is actually required here, then J&J should declare it themselves. They won't because then they'd have to stop paying dividends.
There is plenty of room for tort reform to malye things fairer. Sham bankruptcies and a texas two step is not the appropriate method to bring fairness to victims of a financially solvent company.
Hint, when the victims oppose legal maneuver that is supposed to "make things more fair for them" and the perpetrator supports it, then the legal maneuver probably isn't doing what it claims to be doing.
I quoted you the judge's opinion where he states he recognizes "a need for early filing even before it's insolvent." To me, that is agreeing in principle and idea, just that here he called it too early/premature. You can choose to skip that again, or read the whole thing in context, it's available on the internet.
If we are discussing one suboptimal process against another, it's a matter of opinion, especially when we have no concrete proof that J&J has been trying to limit liabilities.
> sham bankruptcy to force litigants against it to to settle through a single judge
It gets everyone same damages, does it faster, and does it more equitably. Moreover, there likely would be reserve for future victims where they would not have to find a lawyer, litigate a suit, etc. to get damages. Sham would be true if they skimped on damages, they claimed on the filing it's fully backed by parent company so they likely won't.
I don't get the concept of nuking the entire company for one product. Why is dividend even an issue? You think the total cost of damages would be more than their yearly revenue? If not, whatever they do with rest of the money (after the worst case estimate should not be an issue.
I think the motivation was to settle claims and pay damages quickly rather than through a longer drawn out trial. Thats not a bad motive in itself.
And when he dismissed the filing, J&J changed some numbers and refiled the very same day. That obviously wasn't the message that they got out of the judge's ruling.
