Johnson & Johnson on Wednesday reached a new $6.5 billion settlement in its third attempt to resolve lawsuits with tens of thousands of people who are suing the company over claims that its talcum powder products cause cancer. It was announced that the proposal would be approved.
The company said the proposal would resolve nearly all current and future claims that its talcum powder products caused ovarian cancer. Like the previous two efforts (in 2021 and 2023), the new agreement seeks to use elements of the bankruptcy system to resolve debts.
Judges rejected two previous attempts on the grounds that bankruptcy court was not the appropriate venue. Johnson & Johnson said it plans to appeal its recent bankruptcy dismissal to the Supreme Court, but the company said Wednesday why it believes its new initiative will withstand the same legal challenges as before. was not disclosed.
A representative for Johnson & Johnson declined to comment beyond the announcement.
The company has been locked in a liability dispute over one of its most famous products, baby powder, which thousands of people say caused ovarian cancer and mesothelioma because it was contaminated with asbestos. We are trying to bring an end to the long-running legal battle. The company has long denied these claims, but in recent years it has stopped selling its talc-based baby powder worldwide.
Last year, Johnson & Johnson proposed an $8.9 billion settlement to resolve 40,000 lawsuits through a subsidiary created in 2021 to absorb liability from the talc powder lawsuit. The plan was to have the department file for bankruptcy protection, then go to court and pay a settlement.
Lindsay Simon, a bankruptcy professor at Emory University School of Law, said the reason bankruptcy courts are an attractive way to resolve large cases is because companies can avoid lawsuits from claimants who don't accept their offers or from future claimants. He said it was because he could put an end to it. .
“Bankruptcy law's ability to force acceptance of a transaction that affects that 25%, current and future creditors, is a powerful medicine,” she says. “This is a great blessing that cannot be given lightly. Once it is over, there is no going back.”
A judge in July dismissed Johnson & Johnson's bankruptcy filing, saying it was not in actual financial distress, a key requirement for filing for bankruptcy. The first attempt to solve this problem through bankruptcy law was blocked by a judge for the same reason.
The settlement also relies on a Chapter 11 reorganization by a division called LLT Management. The company, formerly known as LTL Management, recently reincorporated from New Jersey to Texas, where Johnson & Johnson is pending filing. Texas courts have been more lenient in the past regarding the criteria under which companies can file for bankruptcy.
Under the new proposal, claimants would have three months to vote on the plan. If 75% of claimants vote yes, a “prearranged” Chapter 11 bankruptcy filing will be filed.
Eric Haas, Johnson & Johnson's head of litigation, said in a statement Wednesday that presenting the proposal to plaintiffs would “compromise the minority of plaintiffs' lawyers who stand to receive exorbitant legal fees outside of a reorganization.” “The financial incentive to do so is avoided.” ”
Andy Burchfield, an attorney with the Beasley Allen law firm who is representing the claimants, said in a statement Wednesday that “this solicitation and voting bankruptcy is considered fraudulent and a malicious act under the Bankruptcy Code. It will be filed,” he said.
