Johnson & Johnson said on Wednesday it will ask tens of thousands of people suing the company over allegations that its talcum powder products gave them cancer to agree to a new $6.5 billion settlement, its third attempt to resolve the lawsuits.
The company said the proposal would settle nearly all current and future claims that its talcum powder products cause ovarian cancer. Like the two previous attempts — in 2021 and 2023 — the new deal will attempt to use an element of the bankruptcy system to settle claims.
The judges rejected the two previous attempts, on the grounds that bankruptcy court was not the appropriate place for them. Johnson & Johnson said it plans to appeal the latest bankruptcy dismissal to the Supreme Court, but the company did not specify Wednesday why it believes the new effort will survive legal challenges similar to the previous ones.
Representatives for Johnson & Johnson declined to comment after its announcement.
The company is trying to end a more than decade-long legal saga over its liability for baby powder, one of its most popular products, which thousands claim caused ovarian cancer and mesothelioma because it was contaminated with asbestos. The company has long denied the allegations, but in recent years it has stopped selling 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 for talcum powder-related lawsuits. The plan was to have the unit file for bankruptcy protection, and then go to court to pay the settlement.
Lindsey Simon, a bankruptcy professor at Emory University School of Law, said the reason bankruptcy court was an attractive way to settle class action lawsuits was because it allowed the company to close out cases brought by claimants who didn't agree to its offer, as well as from future claimants.
“The ability of bankruptcy law to force the 25 percent to accept a deal that affects their rights — current and future claimants — is powerful medicine,” she said. “This is a huge benefit that is not given lightly. Once this is done, there is no going back.”
A judge rejected that bankruptcy filing in July, saying that Johnson & Johnson was not in fact in any financial distress, a prerequisite for filing for bankruptcy. The first attempt to resolve the bankruptcy issue was blocked by the judge for the same reason.
The latest settlement also depends on a Chapter 11 reorganization, by a unit called LLT Management. The company, formerly known as LTL Management, was recently reincorporated in Texas, where Johnson & Johnson is preparing to file, from New Jersey. Texas courts in the past have taken more lenient stances regarding the standard at which a company can file for bankruptcy.
Under the new proposal, claimants would have three months to vote on the plan. If 75% of claimants vote in favor, a “pre-packaged” Chapter 11 bankruptcy filing will be filed.
Making the offer to claimants avoids “conflicting financial incentives for the small minority of plaintiffs’ lawyers who will receive excessive legal fees outside of the reorganization process,” Eric Haas, head of litigation at Johnson & Johnson, said in the statement released Wednesday. “
“Any bankruptcy based on this petition and vote will be found fraudulent and filed in bad faith under the Bankruptcy Code,” Andy Burchfield, an attorney with the Beasley Allen Law Firm representing the claimants, said in a statement Wednesday.
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