With Johnson & Johnson sweetening the pot and mustering up the support of 83% of those who claim that the company’s talc products caused their cancer, it had appeared that the sides were speeding toward a resolution of the litigation through J&J’s third bankruptcy attempt.
But the U.S. Department of Justice (DOJ) has called a foul.
In federal bankruptcy court in Houston, Texas, the U.S. Trustee program—the DoJ’s unit that oversees bankruptcy cases—has filed a motion (PDF) to dismiss a Johnson & Johnson subsidiary's Chapter 11 bid to settle the 60,000-plus talc lawsuits.
Calling J&J’s strategy “a textbook example of bad faith,” the U.S. Trustee claims that the company’s subsidiary Red River Talc LLC—which was established by J&J with the intent to declare it bankrupt and forge a settlement—“has no need for bankruptcy relief.”
“There is no legitimate purpose in allowing (Red River) to remain in bankruptcy while it pursues a futile strategy, designed to benefit a non-debtor, J&J, that cannot lead to a confirmable plan of reorganization,” the U.S. Trustee wrote in its filing.
The U.S. Trustee contends that there is nothing different about J&J’s Chapter 11 case from its two previous bankruptcy attempts which were dismissed in New Jersey because the federal court ruled that the subsidiary, LTL Management, was not in financial distress.
Allowing this bankruptcy attempt also would run counter to the U.S. Supreme Court’s decision four months ago to throw out a similar Chapter 11 plan by Purdue Pharma, the U.S. Trustee said. In that case, Purdue had hoped to resolve opioid claims with a $10 billion settlement.
J&J has 21 days to respond to the U.S. Trustee filing, stating why the motion should be rejected.
The company did not respond immediately to a request for comment.
A month ago, J&J added $1.75 billion to its settlement offer, raising its offer to $8 billion which would be paid over 25 years. By that time, J&J had already gained commitments from 83% of the talc plaintiffs, a figure that exceeds the 75% approval threshold set by the U.S. Bankruptcy Code, J&J pointed out.
J&J first put the Texas two-step bankruptcy maneuver into motion in 2021. But the bid was shot down twice by a federal appeals court, once in January 2023 and again in July.
While J&J has long defended its talc-based products, the company has removed them from the market in recent years—first in North America in 2020 and then the rest of the world in 2023. The drugmaker now sells a cornstarch-based version of its baby powder.
While J&J has been victorious in most of talc cases that have gone to trial, the company says it is trying to avoid the cost and time it would take to litigate the lawsuits.
“If you took the number of cases alone, it would take 2,500 years to adjudicate in the courts,” J&J’s chief financial officer Joseph Wolk, said on Bloomberg TV last week.
J&J also wants to avoid decisions, like one from last week where the company was ordered to pay $15 million to a Connecticut man who claimed that inhaling J&J’s baby powder caused his mesothelioma. In the case, the company also is on the hook for as-of-yet undetermined punitive damages.