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Johnson & Johnson (J&J) has agreed to pay $8.9 billion to settle lawsuits alleging that talc in its baby powder caused ovarian cancer and mesothelioma. The settlement is a significant increase from J&J’s initial offer of $2 billion, which failed to resolve the looming talcum powder cases. The funding would be the largest resolution in any mass tort product liability bankruptcy case, according to an April 4 court filing. Over 60,000 current talc claimants have supported the plan through their lawyers.
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 seeks to limit its liabilities through a “Texas two-step” bankruptcy. This involves the creation of two new entities: LTL Management, which holds the talc liabilities, and Johnson & Johnson Consumer Inc., which holds almost all the old J&J’s productive business assets.
The original bankruptcy filing had been dismissed by the 3rd U.S. Circuit Court of Appeals in January, which ruled that LTL Management could not seek bankruptcy protection because it was not in financial distress due to an indemnity agreement with J&J. J&J has since terminated the indemnity agreement and has a new funding agreement in place.
The plaintiffs’ lawyers had appealed and won after the first bankruptcy filing. Experts, however, doubt the new bankruptcy will work, with some labeling it as a “rather audacious ploy.” Ralph Brubaker, a professor at the University of Illinois College of Law, has called the move “cynical strategic machinations to manufacture self-inflicted financial distress hardly bolster[ing] the case for a legitimate, good faith resort to bankruptcy relief.”
Despite this, J&J is confident that the settlement will win approval as it has the support of a sufficient number of plaintiffs. According to Reuters, a restructuring plan needs approval from 75% of creditors to gain the approval of a bankruptcy judge in asbestos-related bankruptcies.
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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, with some producing verdicts, some failing, and others settling. In one case, a jury awarded $4.69 billion to 22 ovarian cancer patients. This was later reduced on appeal to $2.24 billion for the 20 plaintiffs still in the litigation.
The settlement comes as J&J is already facing significant legal challenges. The company has been ordered to pay billions in damages in a separate case alleging that its opioid painkillers fueled a public health crisis. Additionally, J&J faces lawsuits related to its role in marketing prescription painkillers and producing COVID-19 vaccines.
J&J is one of several large corporations that have sought to limit their legal liabilities through bankruptcy proceedings. In recent years, companies such as Purdue Pharma and Boy Scouts of America have used bankruptcy to resolve mass tort cases.
Overall, the settlement marks a significant increase from J&J’s initial offer and underscores the company’s challenges in addressing the legal fallout from the talcum powder cases.
