By Dietrich Knauth
New Delhi: A Johnson & Johnson subsidiary filed for bankruptcy for a third time on Friday as the healthcare giant seeks to advance an approximately $10 billion proposed settlement that would end tens of thousands of lawsuits alleging that the company’s baby powder and other talc products caused cancer.

J&J faces lawsuits from 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. To stop those lawsuits, J&J subsidiary Red River Talc filed for bankruptcy protection in a federal bankruptcy court in Houston.

The company has denied the allegations and has called its products safe.

Erik Haas, J&J’s worldwide vice president of litigation, said on Friday that the settlement is “fair and equitable to all parties” and that 83% of current talc claimants voted for it.

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

Andy Birchfield, an attorney opposed to the deal, said that J&J is gaming the bankruptcy system in an attempt to underpay tens of thousands of cancer victims.

“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 deal, including Allen Smith, a lawyer who had previously represented 11,000 claimants in partnership with Birchfield’s law firm.

Smith said the settlement offer “finally provides my clients reasonable and fair compensation. It’s now time to go to work and get them compensated as soon as possible.”

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

Bankruptcy judges can enforce global settlements that permanently halt all related lawsuits and forbid new ones.

Outside of bankruptcy, any settlement J&J reached with some claimants would still leave holdouts or future plaintiffs with the right to sue – and leave the company exposed to potential multibillion-dollar verdicts that encouraged it to use a two-step in the first place.

To improve its chances in a third bankruptcy effort, J&J asked plaintiffs to vote on its proposed deal ahead of time to ensure that it has enough support for its plan to succeed. J&J needed more than 75% to back the plan for a bankruptcy judge to impose the deal on all plaintiffs.

GYNECOLOGICAL CANCER CLAIMS

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 gynecological cancer claims, building on J&J’s previous settlements with state attorneys general and people who had sued after developing mesothelioma, a rare form of cancer linked to asbestos exposure.

J&J’s proposed settlement would pay talc claimants about $10 billion over 25 years. The present value of the settlement is roughly $8 billion after J&J recently agreed to kick in an additional $1.1 billion to the settlement fund and pay $650 million in legal fees to attorneys that had previously opposed the settlement offer.

The company has been engaged in a bitter fight with lawyers opposing its third attempt to settle the litigation in bankruptcy.

J&J’s bankruptcy strategy still faces legal hurdles. These include a June U.S. Supreme Court decision involving Purdue Pharma‘s bankruptcy, court orders dismissing its previous efforts and proposed federal legislation aimed at preventing financially healthy companies like J&J from benefiting from bankruptcy protection.

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

  • Published On Sep 21, 2024 at 10:30 AM IST

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