Applying lessons learned from its first failed bankruptcy for talc lawsuits may produce dividends for Johnson & Johnson.
Thursday, U.S. bankruptcy judge Michael Kaplan froze more than 38,000 lawsuits as part of the company’s second attempt to declare bankruptcy for its subsidiary, LTL Management, which was established to hold the cases. The plaintiffs allege that J&J’s baby powder and other talc products cause cancer.
Kaplan ruled that proceedings be put on hold until June 15. The decision came after J&J offered to settle the cases for $8.9 billion. In the company’s first bankruptcy try, it offered a settlement of $2 billion. While that attempt wasn’t successful, it bought the company 19 months during which cases were on hold.
"The decision is a win for claimants, who are now one step closer to being able to vote for themselves on whether to accept the proposed resolution," Erik Haas, J&J's head of worldwide litigation, said in a statement. "We are confident the vote will overwhelmingly support the proposal, as it presents the only equitable path forward."
Kaplan is the same New Jersey judge who affirmed J&J’s ability to use Chapter 11 in its first bankruptcy effort. That decision came in February 2022. But three months ago, a federal appeals court overturned the verdict, ruling that the company could not be considered in “financial distress,” since J&J had agreed to fund LTL’s liabilities with up to $61.5 billion.
When J&J’s appeal was again rejected earlier this month, the cases became unfrozen. But that lasted for roughly two hours as the company filed its second bankruptcy, with the new settlement offer.
J&J has already paid a major price for litigating talc claims. In its first-quarter earnings presentation Tuesday, the company reported a $6.9 billion charge tied to its talc defense, leading to a net loss of $68 million during the period.
An $8.9 billion settlement would provide approximately $120,000 each to roughly 70,000 claimants, lawyers for plaintiffs have said. In addition to the more than 38,000 plaintiffs whose cases were halted by the bankruptcy, many more have subsequently been filed.
Lawyers representing a large group of the plaintiffs—most of them with claims that J&J talc products caused their ovarian cancer or mesothelioma—are rejecting the settlement and bankruptcy claim.
“While we appreciate the bankruptcy court’s attempt to support some measure of relief for our claims, this ruling does not support the desperate pleas of women and men who are dying every day,” Leigh O’Dell of Beasley Allen, the co-chair of the plaintiffs steering committee, said in a statement. “We continue to believe that this bankruptcy effort is illegitimate, that the civil courts remain the venue to resolve civil claims.”
Another group of law firms—including Nachawati Law Group of St. Louis and Watts Guerra LLC of San Antonio—are supporting the settlement, saying that if put to a vote, 90% of all claimants would accept. If the deal is allowed by Kaplan, it would have to be signed off on by at least 75% of the claimants to be approved.
J&J's offer comes after years of litigation, including a high-profile trial that resulted in a $4.7 billion verdict against the drugmaker. The verdict was later reduced to $2.1 billion after appeals.
J&J has lost nine talc trials that are either on appeal or have been resolved. Out of 41 trials, 32 have ended in a win by J&J, a mistrial or plaintiff verdicts that were reversed on appeal. Separately, the company in 2020 moved to settle around 1,000 cases for $100 million, Bloomberg reported at the time.
Despite taking its talc products off the market—first in North America in 2020 and the rest of the world this year—J&J claims that there is no conclusive evidence that they cause cancer.