Johnson & Johnson (J&J) has agreed to pay $8.9 billion to settle lawsuits alleging talc in its baby powder caused ovarian cancer and mesothelioma. The settlement is a significant increase over J&J’s original $2 billion offer, which failed to resolve the looming talcum powder cases. The funding would be, according to a court filing dated April 4. Over 60,000 current Talk applicants have supported the plan through their attorneys.
J&J attempted to settle the talcum powder cases in bankruptcy court, but its first attempt failed because it was not in financial distress. This time, J&J is attempting to limit its liabilities through a “Texas Two Step” bankruptcy. This includes the creation of two new companies: LTL Management, which holds the talc liabilities, and Johnson & Johnson Consumer Inc., which holds nearly all of J&J’s productive business assets.
The original bankruptcy filing was dismissed in January by the 3rd US Circuit Court of Appeals, which ruled that LTL Management could not file for bankruptcy protection because it was not in financial distress as a result of an indemnification agreement with J&J. J&J has since terminated the compensation agreement and entered into a new financing agreement.
The plaintiffs’ attorneys appealed and won after the initial bankruptcy filing. But experts doubt the new bankruptcy will work, with some calling it a “pretty brazen ploy”. Ralph Brubaker, a professor at the University of Illinois College of Law, described the move as “cynical strategic machinations designed to create self-inflicted financial troubles that give little impetus[ing] the case for legitimate, bona fide recourse to bankruptcy relief.”
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Despite this, J&J is confident that the settlement will be approved as it is supported by a sufficient number of plaintiffs. According to Reuters, in order to receive judge approval in asbestos-related bankruptcies, a restructuring plan must be approved by 75% of creditors.
J&J has emphasized that the bankruptcy filings are not “an admission of wrongdoing nor an indication that the company has changed its longstanding position that its talcum powder products are safe.”
Tens of thousands of lawsuits have been filed against J&J, some resulting in judgments, some failing and others being settled. In one case, a jury awarded 22 ovarian cancer patients $4.69 billion. This was later reduced on appeal to $2.24 billion for the 20 plaintiffs who remained at trial.
The settlement comes as J&J is already facing significant legal challenges. The company was ordered to pay billions in damages in a separate case alleging its opioid painkillers fueled a public health crisis. Additionally, J&J is facing lawsuits related to its role in marketing prescription pain medication and manufacturing COVID-19 vaccines.
J&J is one of several large companies that have attempted to limit their legal liability through bankruptcy proceedings. In recent years, companies like Purdue Pharma and Boy Scouts of America have used bankruptcy to solve mass crime cases.
Overall, the settlement represents a significant step up from J&J’s original offering and underscores the company’s challenges in managing the legal ramifications of the talcum powder cases.
