[Congressional Record Volume 169, Number 30 (Tuesday, February 14, 2023)]
[Senate]
[Pages S375-S376]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                          Corporate Bankruptcy

  Mr. President, last month, the Third Circuit Court of Appeals 
rejected an attempt by the venerable corporation Johnson & Johnson, 
which sought to make a mockery of our system of justice and bankruptcy 
laws. In this case, Johnson & Johnson tried to use a legal scheme known 
as the Texas two-step. It is an accurate name because it would have 
allowed Johnson & Johnson to dance around its obligations to the 
consumers it had harmed. This is not a few people we are talking about; 
this case concerns 40,000 Americans who used Johnson & Johnson products 
and have been diagnosed with ovarian cancer or mesothelioma.

[[Page S376]]

  Let's start from the beginning. For years, Johnson & Johnson denied 
that the talcum powder in its product known as baby powder contained 
asbestos. They denied it, but the company's internal documents tell a 
different story. They indicated that Johnson & Johnson was aware for 
decades that its products contained asbestos, but J&J kept those 
products on the market anyway, and consumers, who trusted the brand, 
kept using them.

  In the years that followed, tens of thousands of these loyal 
customers were diagnosed with debilitating and in some cases terminal 
illnesses. Eventually, many of the same customers filed lawsuits 
against Johnson & Johnson, but before most of the claims against the 
company could be heard, Johnson & Johnson closed the doors to the 
courtroom. It used the so-called Texas two-step to transfer its legal 
liabilities to a shell company and then, step two, had the shell 
company declare bankruptcy.
  Here is the important part: When the shell company declared 
bankruptcy, Johnson & Johnson asked the court to freeze all ongoing 
litigation. That maneuver effectively prevented the company's victims 
from proceeding with their cases. Instead, these victims have to get in 
line in bankruptcy court, along with many creditors, and wait for some 
small payment years ahead.
  That was Johnson & Johnson's devious scheme, and it was all going 
according to plan until last month when the Third Circuit stepped in 
and stopped the music on Johnson & Johnson's Texas two-step. The Third 
Circuit ruled that Johnson & Johnson's shell company had not acted in 
good faith when it declared bankruptcy. They were right.
  The Third Circuit's ruling is an important victory, but the tragic 
reality is, for some of Johnson & Johnson's baby powder victims who 
sought justice, it was too little too late.
  One of those victims was Kimberly Naranjo. Throughout her life, Ms. 
Naranjo was a model of resilience. She grew up surrounded by addiction 
and abuse and spent her teenage years moving from one foster home to 
another. Ms. Naranjo also struggled with addiction herself, but at the 
age of 19, she had her first child, and she changed course in her life. 
She set herself on the path to recovery and resolved to provide her 
seven children the stability and love she never knew.
  Eventually, Ms. Naranjo found her calling. She earned a degree in 
alcohol and drug counseling and landed her dream job supporting other 
people on their path to recovery. But then, 3 days into her new job, 
Ms. Naranjo felt a pain in her side. She went to the doctor, who 
diagnosed her with mesothelioma. Soon after her diagnosis, Ms. Naranjo 
determined the only way--the only way--she could have been exposed to 
asbestos was through that so-called safe baby powder she used on all of 
her children, Johnson & Johnson baby powder.
  Last year, the Judiciary Committee, which I chair, held a hearing on 
corporate use of bankruptcy. We included Johnson & Johnson's use of the 
Texas two-step. We were joined by Ms. Naranjo, who shared her story. 
She told the committee:

       When I learned that I could file a lawsuit against Johnson 
     & Johnson and have it decided by a jury, I finally saw a path 
     forward for my family.

  She continued:

       That hope was taken from me. I learned that Johnson & 
     Johnson filed for bankruptcy and that I would not receive a 
     court date.

  Ms. Naranjo died from her illness last month, weeks before turning 50 
and weeks before the Third Circuit's ruling against Johnson & Johnson. 
She never received the justice she deserved.
  Make no mistake, as long as the world's biggest, wealthiest companies 
have the ability to game our legal system and escape liability, there 
will be more tragic stories like Ms. Naranjo's because Johnson & 
Johnson is not alone in abusing bankruptcy law to avoid accountability, 
and that is a fact. In fact, other very large, very solvent companies 
are getting in on the game.
  One similar case is currently being considered by the Seventh Circuit 
Court of Appeals. This one concerns a familiar name--3M--and its 
subsidiary Aearo Technologies. Like Johnson & Johnson, 3M is trying to 
game the bankruptcy system to avoid accountability to its customers. 
And these are not your average consumers; in this case, we are talking 
about 230,000 military veterans.
  So what happened? These veterans claim they suffered hearing loss 
because they wore defective earplugs while in service to our country. 
These earplugs were manufactured by 3M and that subsidiary I mentioned, 
Aearo Technologies.
  When those veterans came forward with their allegations, 3M turned to 
the same get-out-of-jail-free card that Johnson & Johnson tried to use. 
Aearo declared bankruptcy, and then 3M, which is certainly not 
bankrupt, promptly asked the court to use the bankruptcy stay to freeze 
all ongoing earplug litigation from American veterans.
  So instead of facing the lawsuits these veterans brought, 3M is 
trying to use chapter 11 bankruptcy to lock the doors to the courtroom. 
How about that?
  Fortunately, in this case, a judge refused to let 3M get away with 
it. Last August, a bankruptcy court ruled against the company's cynical 
legal scheme. But instead of changing course on this shady strategy, 
Aearo Technologies of 3M fame appealed the case to the Seventh Circuit.
  Earlier this month, I led a number of my colleagues in the Senate and 
House in submitting an amicus brief to the Seventh Circuit. In it, we 
wrote that the Congress did not intend for the bankruptcy system to 
serve as a get-out-jail-free card for wealthy corporations facing 
litigation, especially from American veterans.
  I hope the Seventh Circuit joins the Third Circuit in ruling against 
these schemes to deny Americans and veterans their day in court. But 
the truth is, these companies are trying to game the system that we in 
Congress created. As lawmakers, we write the laws and the rules for 
declaring chapter 11 bankruptcy. So, really, we have the responsibility 
to step up and confront these corporate abusers of bankruptcy. We must 
work together to keep the doors of our justice system open to every 
American seeking their day in court.
  I believe the Senate is capable of doing things, even hard things. I 
believe we can bring America closer to our central aspiration of 
justice, and I believe we can instill more faith in this Nation of laws 
by ending these corporate abuses of bankruptcy once and for all.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida.

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