Summarizing Matt Levine's various columns on the issue from memory:
1. J&J lost a lawsuit about talc and the winner was awarded $Xb (or maybe $XXXm, my memory is fuzzy) in damages.
2. J&J transferred $XXb to a new company.
3. It let the new company take on current and future liabilities for judgements on the talc issue.
4. J&J then had the new company declare bankruptcy. The bankruptcy process is designed to pay out money fairly to all creditors. The new company's only creditors were the plaintiffs in the lawsuit J&J lost + any future claimants. So this wasn't necessarily nefarious.
5. A judge rejected the bankruptcy because J&J had funded the company with $XXb and that was in excess of its current liabilities. As Levine put it, the company wasn't "bankrupt enough" yet.
I didn't keep up with the story after that so maybe I missed something.
Yup. It's "weird" that all of these companies claim that "swear to god, we fully intend to honor our obligations", then all of them use this one law firm who specializes in doing exactly the opposite and "oops, look what happened, we have no more legal obligation, that belongs now to this other entity that we said we'd fund but ... somehow ... didn't. Or certainly not anywhere near where we said we would."
But there are definitely apologists and deniers of it, even right here on HN. Or "you don't know that's what's going to happen, we owe it to them to wait and see", even as you watch the exact same law firm guide another company through the exact same process in the exact same way, but somehow, maybe, this time, it'll have a different outcome.
It’s only illegal if they don’t get away with it. Most get away with it in corporate America. If bad actors are going to push the bounds of the legal framework, good actors should as well when the rules don’t matter. Rule of “Fuck you make me.” To improve odds of success, one could operate from a position of being judgement proof, organizing corporate and legal entities accordingly from a charging perspective. Laws are not objective, it’s all interpretative dance. Know how to dance for the performance you choose to participate in.
Yet large companies appear to get away with it all the time - for example the so called Texas two step.
https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
In my view the best way to get this sort of stuff banned is to start using it yourself.
J&J tried it but was ultimately rejected last year.
Somewhat different circumstances.
Summarizing Matt Levine's various columns on the issue from memory:
1. J&J lost a lawsuit about talc and the winner was awarded $Xb (or maybe $XXXm, my memory is fuzzy) in damages.
2. J&J transferred $XXb to a new company.
3. It let the new company take on current and future liabilities for judgements on the talc issue.
4. J&J then had the new company declare bankruptcy. The bankruptcy process is designed to pay out money fairly to all creditors. The new company's only creditors were the plaintiffs in the lawsuit J&J lost + any future claimants. So this wasn't necessarily nefarious.
5. A judge rejected the bankruptcy because J&J had funded the company with $XXb and that was in excess of its current liabilities. As Levine put it, the company wasn't "bankrupt enough" yet.
I didn't keep up with the story after that so maybe I missed something.
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Yup. It's "weird" that all of these companies claim that "swear to god, we fully intend to honor our obligations", then all of them use this one law firm who specializes in doing exactly the opposite and "oops, look what happened, we have no more legal obligation, that belongs now to this other entity that we said we'd fund but ... somehow ... didn't. Or certainly not anywhere near where we said we would."
But there are definitely apologists and deniers of it, even right here on HN. Or "you don't know that's what's going to happen, we owe it to them to wait and see", even as you watch the exact same law firm guide another company through the exact same process in the exact same way, but somehow, maybe, this time, it'll have a different outcome.
It’s only illegal if they don’t get away with it. Most get away with it in corporate America. If bad actors are going to push the bounds of the legal framework, good actors should as well when the rules don’t matter. Rule of “Fuck you make me.” To improve odds of success, one could operate from a position of being judgement proof, organizing corporate and legal entities accordingly from a charging perspective. Laws are not objective, it’s all interpretative dance. Know how to dance for the performance you choose to participate in.