Johnson & Johnson said it has agreed to pay $8.9 billion to settle all cancer claims related to its talc-based powders and will make a new attempt to mitigate liability in a bankruptcy filing at one of its entities.
The world’s largest health products maker hopes to settle grievances from about 60,000 claimants and fund a trust set up in the U.S. Bankruptcy Court in Trenton, New Jersey, to cover future claims, the company said in a securities filing on Tuesday.
J&J has already phased out its talc-based baby powder and others, including Shower to Shower.
J&J’s LTL management unit filed a new Chapter 11 bankruptcy case to establish a basis for the trust, which outlines the terms of the settlement of the decades-long litigation.
An earlier motion that did not include a settlement was denied in January after an appeals court found that J&J erred in declaring bankruptcy to prevent juries from hearing claims and awarding damages.
J&J wants a reorganization plan for LTL that limits overall talc liability.
“The resolution of this matter through the proposed reorganization plan is both fairer and more efficient, allowing for timely redress of the plaintiffs,” said Erik Haas, global head of litigation at J&J.
The payouts in the comparison are spread over 25 years.
Following the announcement, J&J shares rose as much as 3 percent in trading after U.S. markets closed on Tuesday.
If enough victims agree to join the deal, J&J will be relieved of defending cancer claims related to baby powder and other asbestos-contaminated products.
A jury ruled against the company in nearly a dozen such lawsuits over the years — including those challenged in the US Supreme Court — before J&J was forced to pay $2.5 billion to a group of 20 women whose case came before the court in 2018.
traces of asbestos
Women and men have blamed J&J baby powder for the development of ovarian cancer and mesothelioma, a cancer specifically associated with asbestos exposure.
Quote
The resolution of this matter through the proposed reorganization plan is both fairer and more efficient, allowing for timely compensation to beneficiaries
Erik Haas, Global Head of Litigation, J&J
Victims say internal J&J documents from the early 1970s show workers warning managers about traces of asbestos found in talc bottled for baby powder.
Victims claim J&J executives should have warned consumers about the powder’s health risks.
“This is the largest product liability settlement ever reached following a bankruptcy filing,” said Mikal Watts, one of the attorneys for the plaintiffs who negotiated the deal with J&J.
“Our mission is to bring our clients redress for their injuries, and this settlement is the culmination of over a decade of fighting for justice.”
According to J&J, Talk’s cases pose a financial threat to the company, despite its market cap of more than $478 billion.
That’s because juries could repeatedly hit J&J with billion-dollar verdicts that threaten its financial health, its attorneys claim.
The company, founded in 1886, also suffered reputational damage related to the talc finds.
J&J has been criticized for using the bankruptcy courts to promote a settlement.
Such filings allow companies to defer lawsuits while a judge assesses their worth.
In order to obtain court approval for such trusts, 75 percent of victims must vote to have their claims go through this process.
Under the terms of the agreement, J&J agreed to pay $6.5 billion to resolve current and future ovarian cases, provide $2 billion for current and future mesothelioma cases, and give $400 million to states, who have sued J&J for failing to warn consumers of the health risks associated with its talc-based powders or threatened lawsuits, sources say.
Opposite deal
J&J has negotiated its new deal with attorneys outside the senior management group overseeing talk cases consolidated as a multi-district litigation (MDL) before a federal judge in New Jersey.
Lawyers for the MDL said J&J did not raise enough money and ridiculed its repeated attempts to use bankruptcy proceedings to deny victims trials.
“This second bad faith bankruptcy is an attempt by J&J to get cancer victims to accept a low-ball deal that would leave most of them with staggering unpaid medical bills and lost wages,” said Jason Itkin, an attorney for Applicants opposing the deal named.
“We believe this second bankruptcy will be dismissed in the same way as the first.”
In its January ruling, the Court of Appeals said that J&J erroneously placed its newly created entity, LTL Management, under judicial protection to deal with the Talk litigation.
The three-judge panel found that the company was not in “financial distress” and not entitled to protection since J&J agreed to put in place a more than $61 billion backup plan for its unit.
Hours before the new case was filed, an official committee of Talk applicants filed court documents alleging that a second Chapter 11 petition would be wrong. The group, which represented cancer victims in the first bankruptcy filing, said the company should not go back into bankruptcy.
The new filing was intended to meet the demands of the appeals court, which dismissed the first case, attorneys who wrote both Chapter 11 filings for J&J said in court filings.
In the most recent case, the company replaced the backstop agreement with the $8.9 billion settlement, lawyers for J&J said. The settlement funds will be LTL’s only financial resource, they said.
“I applaud Johnson & Johnson for finding a fair and equitable resolution that closes a painful chapter for many American women,” said Mark Lanier, a Texas-based attorney who entered a 2018 judgment on behalf of 20 The company raised $.7 billion against women who blamed their ovarian cancer on using baby powder.
Updated: April 05, 2023 5:15 am
