By John Meyer, consultant in financial affairs – Eurasia Business News, September 21, 2024. Article No 1237.

Johnson & Johnson (J&J) has filed for bankruptcy for the third time through its subsidiary Red River Talc LLC, in an attempt to resolve thousands of lawsuits alleging its talc products caused cancer. This latest filing comes after two previous failed attempts and represents a significant development in the ongoing talc litigation saga.

Johnson & Johnson filed an unprecedented third chapter 11 case seeking to end the mass lawsuits linking its cosmetic talc products to cancer, this time with the backing of tens of thousands of personal-injury plaintiffs for a roughly $8 billion compensation plan.

Key Details of the Bankruptcy Filing

Red River Talc LLC, a J&J subsidiary, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. The company is seeking to resolve over 62,000 lawsuits related to its talc products. More than 62,000 claimants who alleged that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers.

J&J has proposed a settlement of approximately $8 billion, an increase of $1.75 billion from its previous offer.

Support for the Bankruptcy Plan

Approximately 83% of current claimants have expressed support for the proposed bankruptcy plan. This level of support exceeds the 75% approval threshold required by the U.S. Bankruptcy Code for plan confirmation.

The Future Claims Representative, an attorney representing future claimants, also supports the plan.

J&J’s Strategy

The company is using a “Texas two-step” bankruptcy strategy to consolidate all claims into a single settlement. This approach aims to resolve all current and future claims without J&J itself filing for bankruptcy.

J&J maintains that none of the talc-related claims against it have merit and that its products are safe.

Challenges and Criticisms

The company’s repeated bankruptcy attempts have been criticized as an abuse of the legal process. Some attorneys representing plaintiffs argue that the bankruptcy filings unfairly delay jury trials for cancer victims. Previous bankruptcy attempts by J&J were rejected by federal courts.

Potential Impact and Next Steps

If approved, the plan would settle 99.75% of J&J’s remaining ovarian cancer lawsuits in the U.S..

The bankruptcy case will need to be reviewed and approved by the Bankruptcy Court.

The outcome of this case could have significant implications for how mass tort litigation is handled in the future.

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This third bankruptcy filing represents J&J’s continued efforts to resolve the talc litigation through the bankruptcy process, despite previous setbacks. The increased settlement offer and high level of claimant support may improve its chances of success, but the company still faces challenges and criticisms from those who oppose this approach.

J&J is among a handful of major corporations that have tried the gambit, which seeks to resolve mass litigation in bankruptcy courts without exposing the company being sued to the consequences of Chapter 11, which can include damaging its market value and credit rating. The strategy gets its name from a Texas law that enables the maneuver by allowing a legally imperiled company to split into two new firms: One to absorb liability and seek bankruptcy protection, the other to continue with business as usual.

The creative legal maneuver, which J&J first undertook in October 2021, once promised to revolutionize the way corporations handled mass tort claims, providing a simple way to jettison the threat of jury trials. But J&J and other firms have met stiff resistance from some plaintiffs and judges, and none has succeeded in reaching a bankruptcy settlement after years of trying.

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© Copyright 2024 – Eurasia Business News. Article no. 1237.