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Bankruptcy isn’t always the best response to consumer lawsuits

On Behalf of | Oct 2, 2023 | Product Liability

Consumer lawsuits are one of the many very expensive risks that come with doing business in the United States. Those who claim that a company released unsafe products can sometimes initiate litigation against the business. They may seek damages such as medical expenses and lost wages.

Consumer lawsuits can prove incredibly expensive for otherwise successful companies, especially if the lawsuit involves allegations of causing permanent injury or death. One way that businesses sometimes respond to consumer lawsuits involves filing business bankruptcy to limit liability and protect company resources. However, business bankruptcy isn’t necessarily the right solution in the wake of a consumer lawsuit or a series of ongoing legal concerns.

A high-profile case provides a powerful example

Johnson and Johnson (J&J) is one of the largest and most successful corporations in the United States and arguably in the world. They have multiple trusted brands under their corporate umbrella and are a direct supplier to many different medical facilities in addition to selling products to consumers at retail establishments.

Unfortunately, it is exactly that success that has created a lot of risk for J&J. Countless consumers over the years have relied on their talc powder products for health and beauty purposes. In recent years, some of those consumers have begun filing lawsuits against J&J, and a few of those lawsuits have results in very large judgments against the company. J&J sought to mitigate the damages generated by such lawsuits by making some major changes to its operations and then filing for bankruptcy.

The judge hearing their case ruled against them, becoming the second judge to rule against J&J in a bankruptcy case related to the company’s talc powder judgments. These two unsuccessful filings can be an important lesson for other businesses seeking to curtail liability generated by consumer lawsuits.

An organization may need to plan ahead to protect itself from claims in the future instead of trying to fight them as they arise. Exploring how successful businesses mitigate product liability might benefit executives concerned about an organization’s financial future because of consumer claims.