A federal appellate court dismissed the bankruptcy filing by a subsidiary of corporate giant Johnson & Johnson. J&J created the unit — dubbed LTL Management — for the express purpose of holding legal liabilities and then filing for Chapter 11.
You have to actually be broke to file for bankruptcy protection — at least that's what a federal appellate court ruled Monday.The court dismissed the bankruptcy filing by a subsidiary of corporate giant Johnson & Johnson. J&J created the unit — dubbed LTL Management — for the express purpose of holding legal liabilities and then filing for Chapter 11.
Critics say that transferring the litigation claims to the new subsidiary and placing that unit in bankruptcy was a tactic to cap J&J's exposure to the liabilities., J&J had an equity value of more than $400 billion, a AAA credit rating, and $31 billion in cash and marketable securities. "This is a vindication of the rule of law and the role of the civil justice system," Jacoby says. "Bankruptcy plays a very important role in our legal system, but it's for extraordinary circumstances."Organizations and companies have been getting more creative about how they attempt to leverage the U.S. Bankruptcy Code to their advantage.
J&J had agreed to provide $2 billion through a trust to pay claims — an amount the alleged victims said was insufficient.said it doesn't intend to "discourage lawyers from being inventive." But, it said that J&J's finances mean it has no right to access the tools of bankruptcy court — which allow debtors to restructure and slash liabilities without facing further legal attacks.
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