From Purdue Pharma To J&J: How Bankruptcy Can Protect From Lawsuits

The video discusses how major companies use bankruptcy to manage civil lawsuits, focusing on the controversial Texas two-step strategy. This involves splitting a company to isolate liabilities, allowing the new entity to declare bankruptcy and shield the original company from lawsuits. The video highlights cases like Johnson & Johnson and Purdue Pharma, exploring the ethical and legal implications of these practices. It also touches on the potential for reform in bankruptcy laws.

What is the main reason companies declare bankruptcy in the face of civil lawsuits?

• To avoid paying taxes

• To increase their market share

• To expand their business operations

• To reorganize and manage liabilities

What is the primary function of an automatic stay in Chapter 11 bankruptcy?

• To enable companies to merge with others

• To increase the company's stock value

• To halt actions from creditors and lawsuits

• To allow companies to hire more employees

How does the Texas two-step strategy work?

• By merging with another company

• By splitting into two entities and declaring bankruptcy for one

• By selling all assets to a competitor

• By relocating the company headquarters

What was Johnson & Johnson's strategy to handle lawsuits related to its talc baby powder?

• They increased the price of their products

• They ignored the lawsuits

• They used the Texas two-step to block lawsuits

• They settled all lawsuits out of court

What is a significant consequence for plaintiffs when companies use the Texas two-step strategy?

• They receive more compensation

• They can sue the company in multiple states

• They gain more legal representation

• They face delays in legal proceedings

What was the outcome for Purdue Pharma after declaring bankruptcy?

• They expanded their product line

• They merged with another pharmaceutical company

• They were completely dissolved

• They were required to pay $6 billion in damages

What potential reform is being considered in response to controversial bankruptcy cases?

• Banning the Texas two-step strategy

• Increasing taxes on bankrupt companies

• Allowing more companies to declare bankruptcy

• Reforming the bankruptcy process