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Great to hear. Stuff like this degrades basically belief that we presently have rule of law in America. Imagine trying to pull this shit as an individual. You

by anm89 4y ago

Great to hear. Stuff like this degrades basically belief that we presently have rule of law in America. Imagine trying to pull this shit as an individual. You burn down some apartment complex and then just create an empty company and assign all of your liabilities to that company and say "you've got to sue them, I've got no liability here". You'd get laughed out of the courtroom. But this came pretty close to working for J & J. When I see looters lighting businesses on fire or breaking windows, I tend to think back to stuff like this or civil forfeiture and say "seems fair". I think the establishment underestimates the extent to which normal people hold this doctrine and feel ok with an all means are justified attitude because they've heard too many stories like this where the law doesn't apply to powerful interests.

xxpor 4y ago
If J&J ultimately wins this, maybe I should form an LLC to take ownership of my car and house just in case I do something in the future where I have massive liability just so I can pull this stunt.
- asah 4y ago
  FYI landlords routinely put their apartments into single-purpose LLCs precisely to cordon-off the liability, while allowing profits to flow back.
  - nimos 4y ago
    I was actually just wondering what is stopping companies from forming separate LLCs for every product line or even product? I mean at some point the administrative overhead is not worth it but 100-1000 individual LLCs seems pretty trivial to manage for a fortune 500 company and that cuts your liability massively if you are able to effectively distribute assets.
    - kasey_junk 4y ago
      I’ve worked in environments where legal entities were kept in a database because there were enough of them to make it worthwhile.
    - icelancer 4y ago
      This is effectively how all real estate works. I'm not quite sure why this doesn't work for things like software, but from my understanding owning actual property makes it significantly more possible / legal.
    - Kon-Peki 4y ago
      For a corporation with thousands of employees and R&D labs, etc, the administrative overhead has to be massive. Like working for Alphabet times 100. An employee would be switching their legal employer every few months, every time they switch teams, all the time; new payroll, new health plan enrollment, etc. People would just Nope the F out of that place.
      - paragraft 4y ago
        Surely you'd just be employed by the internal HR company and on the books each product company would be contracting your services according to timesheets.
        Kon-Peki 4y ago
        Yeah, but then the internal HR company has all the money and also has all the liability. So you've gained nothing for all that administrative headache. Real estate is a special situation with lots of subcontracting. They can make it work. In big multi-unit residential cities like NYC and Chicago, the doorman in that high-rise is in a union that provides all his benefits and has a set pay scale. The building ownership just contracts all that stuff out to the union. But that doorman can go work in some other building owned by some other owner too. You don't want that happening with your corporate employees developing and managing your consumer products.
        treis 4y ago
        It's pretty easy to pierce the corporate veil for these separate but not really separate LLCs. They have to be bona fide separate companies to enjoy the LLC protection.
      - Xcelerate 4y ago
        Sounds like you’ve made a valid prediction for a future consisting of high frequency individual tax loopholes to me.
    - nonfamous 4y ago
      This is essentially what movie studios do: a separate, new company produces each film. (Here though the main goal isn’t liability, it’s to insulate the BigCo from losses, and avoid paying those that made the film that don’t have star contracts.)
    - KMag 4y ago
      It's pretty common in the financial world. The US government doesn't offer zero-coupon bonds, so the big banks create special purpose vehicles that buy US government bonds, split the cash flows into the strips and the zero-coupon bonds, and sell them separately. If some pork belly futures trader wipes out the bank, at least in theory, the special purpose vehicle outlives the rest of the bank and keeps paying out those cash flows, and the pork belly creditors don't get those zero-coupon bonds you bought. At least, I think that's the way it's supposed to work. I used to work at Goldman, and at some point, someone told me that the number of legal entities was roughly the number of employees. I'm not sure how true that was, but I'd believe it. There are some good reasons to allow these separate legal entities, to allow orderly partial collapses of businesses to reduce the risk of cascading systemic failures. There's also something to be said about either keeping businesses small enough that failure of a handful of them won't collapse markets, or else single-purpose enough that they have less direct effects on multiple markets. The flip side is that diversification across markets should tend to stabilize firms, and larger firms are also more able to effectively diversify.
  - anm89 4y ago
    this is different, the actual underlying asset is at stake for liabilities it causes. This is the whole point of corporations. The analogy would be if a landlord created a shell company, and then only gave that company it's legal liabilities without any assets. That's what J&J did here and why this case is so obviously egregious. If you could do that, it would be a get out of jail free card for all legal liability in all cases. It's essentially renouncing rule of law
    - anm89 4y ago
      The top comment on the whole thread explains that my above explanation is slightly off. For a better explanation see https://www.investopedia.com/texas-two-step-bankruptcy-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
- dave78 4y ago
  That exact strategy is very common for owners of small general aviation aircraft. From what I understand it is primarily for liability reasons just like you propose.
  - sokoloff 4y ago
    There's a secrecy reason as well for some (the FAA registry will show "N1234, LLC" as the owner) as well as a sales tax avoidance reason for others. ("I didn't buy an airplane for which I'd owe sales tax on; I bought a company for which no sales tax is due.") In the case of liability avoidance, it's hard to do if the (real-world human) owner of the airplane is also the pilot at the time of any accident. They might not be able to sue you as the owner, but they can still sue you/your estate as the pilot, or the person who oversaw the maintenance, etc.
    - quacksilver 4y ago
      Many people where I am own GA aircraft as a syndicate - everyone is a shareholder in a company and you get x hours per year of flight time per share, and have to pay your share of the costs. I imagine that the limited liability helps if there are say 20 people in the syndicate and you own a share of it. One of the other members can crash the aircraft into something expensive, and as long as it had nothing to do with you or your negligence, you shouldn't be liable beyond your share value going to 0 (or having to pay up any unpaid capital to the book value of your share) An unincorporated partnership would make this much riskier.
- deleted 4y ago
  [deleted]
gruez 4y ago
>When I see looters lighting businesses on fire or breaking windows, I tend to think back to stuff like this or civil forfeiture and say "seems fair" It seems "fair" that some random business owner has their place of business burned down because of the shenanigans that Johnson & Johnson is up to? The only way this can remotely be considered "fair" is if looters only set Johnson & Johnson buildings on fire, and somehow the employees working in those buildings aren't affected.
- luckylion 4y ago
  No, but it seems "fair" that the looters and criminals don't get punished. If we choose to not enforce the law for some, we're choosing not to enforce the law period. If society wants the laws to not apply to corporations beyond some market capitalization, we'll have to explicitly write that into the laws.
  - deleted 4y ago
    [deleted]
  - folsom 4y ago
    Sure, then it should seem fair that when I sit in my bagel shop and shoot people who break out my windows that the law does not punish me. Come on this is a downward spiral that we don't want to get started on right?
    - luckylion 4y ago
      That's the point. We don't want to abandon the law, therefore we must not allow corporation to get away with obvious law-breaking.
  - gruez 4y ago
    > No, but it seems "fair" that the looters and criminals don't get punished. If we choose to not enforce the law for some, we're choosing not to enforce the law period. What's your line of reasoning here? Because we're not properly enforcing civil judgements on J&J, it's therefore "fair" for unrelated people to suffer losses, and for criminals to commit property crimes with impunity? If I pulled a gun on you right now and demanded that you hand me your phone and laptop, would you also consider that fair for the same reason?
acdha 4y ago
One egregious example of this are the mining companies which create a toxic mess and then let the shell company go bankrupt. I can't imagine going into any community downstream of that and saying that the law protects them knowing that not a single penny of the extracted value will be recovered.
- anm89 4y ago
  yeah, great example
- treis 4y ago
  This one isn't quite like that. The evidence for a link between talc and cancer is mixed. Some have found a link but the best quality study did not: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4200058/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4200058/
  - FireBeyond 4y ago
    Honestly, I don't really see the relevance. It's mixed, but that being said, J&J (sorry, LTL) have been found in multiple civil courts to be, by the rules of those courts, to be liable. It's a cake-and-eat-it. "Oh, we are more than happy to use the letter of the law to create a shell company with the intent to bankrupt it for liability sake", but "oh, just because we went to trial and lost, repeatedly, doesn't mean that we're actuaaaaally liable".
  - acdha 4y ago
    Yeah, I'm not saying there's a 1:1 correspondence in the level of harm but rather that the corporate structure to shirk legal responsibility seems very similar. They had the opportunity to make the case that the scientific evidence was weak repeatedly and were unsuccessful, so it seems like they should be expected to honor the rules of the court or stop doing business in the United States. Our entire legal system is based on the idea that both parties respect the court's decision (or appeal it, of course) and it seems really dangerous to allow the party with the most power to unilaterally opt out of that when it'll save them money.
rippercushions 4y ago
In Australia, it's fairly common for builders to incorporate a company for the sole purpose of putting up a shitty building, then have it file bankruptcy once the repair bills and lawsuits start flying, leaving property owners holding the bag. Rinse and repeat.
mensetmanusman 4y ago
Hmmm, concern about rule of law while saying burning down (many minority owned) businesses ‘seems fair’…

by anm89 4y ago

xxpor 4y ago

If J&J ultimately wins this, maybe I should form an LLC to take ownership of my car and house just in case I do something in the future where I have massive liability just so I can pull this stunt.

asah 4y ago
FYI landlords routinely put their apartments into single-purpose LLCs precisely to cordon-off the liability, while allowing profits to flow back.
- nimos 4y ago
  I was actually just wondering what is stopping companies from forming separate LLCs for every product line or even product? I mean at some point the administrative overhead is not worth it but 100-1000 individual LLCs seems pretty trivial to manage for a fortune 500 company and that cuts your liability massively if you are able to effectively distribute assets.
  - kasey_junk 4y ago
    I’ve worked in environments where legal entities were kept in a database because there were enough of them to make it worthwhile.
  - icelancer 4y ago
    This is effectively how all real estate works. I'm not quite sure why this doesn't work for things like software, but from my understanding owning actual property makes it significantly more possible / legal.
  - Kon-Peki 4y ago
    For a corporation with thousands of employees and R&D labs, etc, the administrative overhead has to be massive. Like working for Alphabet times 100. An employee would be switching their legal employer every few months, every time they switch teams, all the time; new payroll, new health plan enrollment, etc. People would just Nope the F out of that place.
    - paragraft 4y ago
      Surely you'd just be employed by the internal HR company and on the books each product company would be contracting your services according to timesheets.
      - Kon-Peki 4y ago
        Yeah, but then the internal HR company has all the money and also has all the liability. So you've gained nothing for all that administrative headache. Real estate is a special situation with lots of subcontracting. They can make it work. In big multi-unit residential cities like NYC and Chicago, the doorman in that high-rise is in a union that provides all his benefits and has a set pay scale. The building ownership just contracts all that stuff out to the union. But that doorman can go work in some other building owned by some other owner too. You don't want that happening with your corporate employees developing and managing your consumer products.
      - treis 4y ago
        It's pretty easy to pierce the corporate veil for these separate but not really separate LLCs. They have to be bona fide separate companies to enjoy the LLC protection.
    - Xcelerate 4y ago
      Sounds like you’ve made a valid prediction for a future consisting of high frequency individual tax loopholes to me.
  - nonfamous 4y ago
    This is essentially what movie studios do: a separate, new company produces each film. (Here though the main goal isn’t liability, it’s to insulate the BigCo from losses, and avoid paying those that made the film that don’t have star contracts.)
  - KMag 4y ago
    It's pretty common in the financial world. The US government doesn't offer zero-coupon bonds, so the big banks create special purpose vehicles that buy US government bonds, split the cash flows into the strips and the zero-coupon bonds, and sell them separately. If some pork belly futures trader wipes out the bank, at least in theory, the special purpose vehicle outlives the rest of the bank and keeps paying out those cash flows, and the pork belly creditors don't get those zero-coupon bonds you bought. At least, I think that's the way it's supposed to work. I used to work at Goldman, and at some point, someone told me that the number of legal entities was roughly the number of employees. I'm not sure how true that was, but I'd believe it. There are some good reasons to allow these separate legal entities, to allow orderly partial collapses of businesses to reduce the risk of cascading systemic failures. There's also something to be said about either keeping businesses small enough that failure of a handful of them won't collapse markets, or else single-purpose enough that they have less direct effects on multiple markets. The flip side is that diversification across markets should tend to stabilize firms, and larger firms are also more able to effectively diversify.
- anm89 4y ago
  this is different, the actual underlying asset is at stake for liabilities it causes. This is the whole point of corporations. The analogy would be if a landlord created a shell company, and then only gave that company it's legal liabilities without any assets. That's what J&J did here and why this case is so obviously egregious. If you could do that, it would be a get out of jail free card for all legal liability in all cases. It's essentially renouncing rule of law
  - anm89 4y ago
    The top comment on the whole thread explains that my above explanation is slightly off. For a better explanation see https://www.investopedia.com/texas-two-step-bankruptcy-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
dave78 4y ago
That exact strategy is very common for owners of small general aviation aircraft. From what I understand it is primarily for liability reasons just like you propose.
- sokoloff 4y ago
  There's a secrecy reason as well for some (the FAA registry will show "N1234, LLC" as the owner) as well as a sales tax avoidance reason for others. ("I didn't buy an airplane for which I'd owe sales tax on; I bought a company for which no sales tax is due.") In the case of liability avoidance, it's hard to do if the (real-world human) owner of the airplane is also the pilot at the time of any accident. They might not be able to sue you as the owner, but they can still sue you/your estate as the pilot, or the person who oversaw the maintenance, etc.
  - quacksilver 4y ago
    Many people where I am own GA aircraft as a syndicate - everyone is a shareholder in a company and you get x hours per year of flight time per share, and have to pay your share of the costs. I imagine that the limited liability helps if there are say 20 people in the syndicate and you own a share of it. One of the other members can crash the aircraft into something expensive, and as long as it had nothing to do with you or your negligence, you shouldn't be liable beyond your share value going to 0 (or having to pay up any unpaid capital to the book value of your share) An unincorporated partnership would make this much riskier.
deleted 4y ago
[deleted]

gruez 4y ago

>When I see looters lighting businesses on fire or breaking windows, I tend to think back to stuff like this or civil forfeiture and say "seems fair" It seems "fair" that some random business owner has their place of business burned down because of the shenanigans that Johnson & Johnson is up to? The only way this can remotely be considered "fair" is if looters only set Johnson & Johnson buildings on fire, and somehow the employees working in those buildings aren't affected.

luckylion 4y ago
No, but it seems "fair" that the looters and criminals don't get punished. If we choose to not enforce the law for some, we're choosing not to enforce the law period. If society wants the laws to not apply to corporations beyond some market capitalization, we'll have to explicitly write that into the laws.
- deleted 4y ago
  [deleted]
- folsom 4y ago
  Sure, then it should seem fair that when I sit in my bagel shop and shoot people who break out my windows that the law does not punish me. Come on this is a downward spiral that we don't want to get started on right?
  - luckylion 4y ago
    That's the point. We don't want to abandon the law, therefore we must not allow corporation to get away with obvious law-breaking.
- gruez 4y ago
  > No, but it seems "fair" that the looters and criminals don't get punished. If we choose to not enforce the law for some, we're choosing not to enforce the law period. What's your line of reasoning here? Because we're not properly enforcing civil judgements on J&J, it's therefore "fair" for unrelated people to suffer losses, and for criminals to commit property crimes with impunity? If I pulled a gun on you right now and demanded that you hand me your phone and laptop, would you also consider that fair for the same reason?

acdha 4y ago

One egregious example of this are the mining companies which create a toxic mess and then let the shell company go bankrupt. I can't imagine going into any community downstream of that and saying that the law protects them knowing that not a single penny of the extracted value will be recovered.

anm89 4y ago
yeah, great example
treis 4y ago
This one isn't quite like that. The evidence for a link between talc and cancer is mixed. Some have found a link but the best quality study did not: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4200058/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4200058/
- FireBeyond 4y ago
  Honestly, I don't really see the relevance. It's mixed, but that being said, J&J (sorry, LTL) have been found in multiple civil courts to be, by the rules of those courts, to be liable. It's a cake-and-eat-it. "Oh, we are more than happy to use the letter of the law to create a shell company with the intent to bankrupt it for liability sake", but "oh, just because we went to trial and lost, repeatedly, doesn't mean that we're actuaaaaally liable".
- acdha 4y ago
  Yeah, I'm not saying there's a 1:1 correspondence in the level of harm but rather that the corporate structure to shirk legal responsibility seems very similar. They had the opportunity to make the case that the scientific evidence was weak repeatedly and were unsuccessful, so it seems like they should be expected to honor the rules of the court or stop doing business in the United States. Our entire legal system is based on the idea that both parties respect the court's decision (or appeal it, of course) and it seems really dangerous to allow the party with the most power to unilaterally opt out of that when it'll save them money.

rippercushions 4y ago

In Australia, it's fairly common for builders to incorporate a company for the sole purpose of putting up a shitty building, then have it file bankruptcy once the repair bills and lawsuits start flying, leaving property owners holding the bag. Rinse and repeat.

mensetmanusman 4y ago

Hmmm, concern about rule of law while saying burning down (many minority owned) businesses ‘seems fair’…