J&J unit files for bankruptcy to advance $10 billion talc settlement

A Johnson & Johnson subsidiary filed for bankruptcy for the third time Friday as the health care giant tries to move forward with a proposed roughly $10 billion settlement that would end tens of thousands of lawsuits alleging the baby powder and other talc products from the company have caused cancer.

J&J is facing lawsuits from more than 62,000 plaintiffs who alleged that its baby powder and other talcum powder products were contaminated with asbestos and caused ovarian and other cancers. To stop those lawsuits, J&J subsidiary Red River Talc filed for bankruptcy protection in federal bankruptcy court in Houston.

The company denied the allegations and called its products safe.

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Erik Haas, J&J’s global vice president of litigation, said Friday that the settlement was “fair and equitable to all parties” and that 83 percent of current talc plaintiffs voted for it.

The proposed settlement has divided lawyers representing cancer victims. Opponents of the deal said they would quickly ask the court to dismiss the bankruptcy or transfer it to New Jersey, where courts have twice rejected J&J’s attempts to end the litigation in a so-called “Texas two-step” bankruptcy.

Andy Birchfield, a lawyer who opposed the settlement, said J&J was gaming the bankruptcy system in an attempt to underpay tens of thousands of cancer victims.

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“We view this so-called vote as another fraudulent effort by J&J to manipulate the bankruptcy process and minimize the legitimate claims of ovarian cancer victims,” ​​Birchfield said.

Other attorneys spoke in support of the settlement, including Allen Smith, a lawyer who previously represented 11,000 plaintiffs in partnership with Birchfield’s law firm.

Smith said the settlement offer “finally gives my clients reasonable and fair compensation. Now it’s time to go to work and compensate them as soon as possible.”

The “two-step” maneuver used by J&J involves offloading debt to a newly created subsidiary that then files Chapter 11, a type of bankruptcy that involves a reorganization of assets and liabilities under court supervision. The goal is to use the proceeding to force all plaintiffs into a single settlement without requiring J&J to file for bankruptcy.

Bankruptcy judges can enforce blanket settlements that permanently stop all related lawsuits and bar new ones.

Outside of bankruptcy, any settlement J&J reached with some plaintiffs would still leave retained or future plaintiffs the right to sue — and leave the company exposed to potential billion-dollar verdicts that have encouraged it to use in first row two steps.

To improve its chances in a third bankruptcy effort, J&J asked the plaintiffs to vote on the proposed settlement early to ensure it had enough support for its plan to succeed. J&J needed more than 75 percent to support the plan for a bankruptcy judge to force consent from all plaintiffs.

J&J’s third attempt at a bankruptcy settlement also differs from its previous efforts in part because it focuses only on ovarian and other gynecologic cancer claims, building on J&J’s previous settlements with the U.S. attorneys general. state and with people who sued after he developed mesothelioma, a rare form of cancer. related to asbestos exposure.

J&J’s proposed deal would pay talc claimants about $10 billion over 25 years. The current value of the settlement is about $8 billion, after J&J recently agreed to put an additional $1.1 billion into the settlement fund and pay $650 million in legal fees to opposing lawyers prior to the settlement offer.

The company has been engaged in a bitter battle with lawyers who oppose the third attempt to settle the bankruptcy litigation.

J&J’s bankruptcy strategy still faces legal hurdles. They include a June U.S. Supreme Court decision involving Purdue Pharma’s bankruptcy, court orders rejecting its earlier efforts and proposed federal legislation designed to prevent financially healthy companies like J&J from seeking bankruptcy protection.

J&J in talks with holds on $6.5 billion talc settlement Read full story

(Reporting by Knauth and Spector in New York; Additional reporting by Bhanvi Satija in Bengaluru; Editing by Will Dunham, Leigh Jones, Sandra Maler, Shounak Dasgupta and Alexia Garamfalvi)