The corporate shell of an ex-industrial chemical maker filed for bankruptcy after a South Carolina jury ordered it to pay more than $29 million to a woman who blamed tainted talc in cosmetic products for causing her cancer and a judge appointed a receiver to insure the award was paid.
(Bloomberg) — The corporate shell of an ex-industrial chemical maker filed for bankruptcy after a South Carolina jury ordered it to pay more than $29 million to a woman who blamed tainted talc in cosmetic products for causing her cancer and a judge appointed a receiver to insure the award was paid.
Whittaker, Clark & Daniels Inc., which is affiliated with Berkshire Hathaway, said in a petition filed in New Jersey that it owes creditors more than $1 billion, much of it to plaintiffs’ law firms that specialize in suing companies who used the talc. The bankruptcy petition allows it to halt lawsuits while it tries to work out a payment plan.
The entity and its three affiliates have had no operations since they sold their assets in 2004 to the North American arm of German chemical distributor Brenntag SE. The companies remained in existence in order to hold and invest money dedicated to paying talc and related claims, according to court papers filed Thursday.
In 2007, an affiliate of Berkshire Hathaway acquired the shell companies. Berkshire, one of the biggest, most profitable companies in the world, was never involved in the talc operations of Whittaker and its affiliates, Berkshire said in a statement.
The Chapter 11 filing is the latest involving talc, a substance used for decades in consumer products ranging from eyeshadow to baby powder. Tens of thousands of people have sued companies that either supplied talc or used it in their products. The lawsuits typically claim the talc was contaminated with a toxic substance or caused cancer on it own.
Pending Cases
Whittaker and its affiliates face more than 1,000 pending talc cases, and are spending about $1 million a month on the lawsuits, according to court records. The goal of the bankruptcy case is to resolve all of current and future claims in one court instead of fighting the lawsuits around the country, the company said in a filing.
If Whittaker is forced to keep fighting the suits, it will face “substantial defense and litigation costs, depleting resources and delaying or limiting recoveries to any legitimate claimants for years to come,” the company said.
The Chapter 11 filing came after Whittaker’s lawyers failed to persuade a South Carolina judge earlier this month that it didn’t need a receiver to run the company while ensuring the award to Sarah Plant, 37, who was diagnosed with mesothelioma, a cancer tied to asbestos exposure, was satisfied.
Judge Jean Toal in Columbia, South Carolina appointed the receiver after Whittaker’s attorneys acknowledged the shell company had only $105 million “in assets available” to pay Plant’s award and those of other talc victims, according to court filings. Toal also noted Whittaker had been hit with more than $48 million in other talc verdicts and its resources to cover those awards had been “precipitously reduced.” She also cited the “numerous trials” the company faced over the next two months in tapping the receiver.
Plant’s lawyers contend Toal’s decision to appoint a court official to oversee Whittaker raises substantial questions about the legitimacy of its Chapter 11 filing. “It is our client’s position that the entity that filed for bankruptcy did not have the authority to do so,” said Trey Branham, a lawyer for the victim.
The South Carolina lawsuit, decided in March, also named Avon, Estee Lauder Lauder Cos, Johnson & Johnson and several other consumer products companies as defendants, although only Whittaker has been found liable in the case so far. The other companies have denied wrongdoing.
Avon, Estee Lauder and J&J did not immediately respond to emails seeking comment.
Contaminated Talc
Whittaker won a similar lawsuit filed in New York after an appeals court threw out a $2.9 million award. In that case, the company was accused of supplying contaminated talc to the maker of Desert Flower powder.
The suits claim the talc that Whittaker supplied contained asbestos, a toxic substance that damages lungs and causes a fatal form of cancer.
Outsize jury awards in tainted talc cases have sent several suppliers and miners into bankruptcy in recent years. J&J created a unit to manage its talc liabilities and put it into bankruptcy a second time in early April. The bankrupt unit, LTL Management, is seeking court approval of an $8.9 billion agreement that would end all of J&J’s current and future talc liabilities.
Whittaker’s bankruptcy case is Whittaker, Clark & Daniels Inc., 23-13575, US Bankruptcy Court, District of New Jersey (Trenton)
–With assistance from Janine Phakdeetham.
(Updates with details on appointment of receiver starting in eighth paragraph)
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