A subsidiary of Johnson & Johnson (J&J) that declared bankruptcy after being swamped with thousands of lawsuits alleging its talc products caused cancer has for the first time agreed to a court-mandated settlement to resolve the cases.
The 62,000-plus lawsuits allege that the company’s baby powder and other talc products included asbestos, causing ovarian cancer and other diseases. To put a stop to the litigation, J&J’s unit Red River Talc filed for bankruptcy in Houston.
J&J has repeatedly rejected the allegations and maintains that its products are safe. J&J’s worldwide vice president of litigation, Erik Haas, said the company believed the settlement was “fair and equitable to all parties,” with 83% of current talc claimants having voted for it.
J&J’s Texas Two-Step Bankruptcy Strategy
J&J, a New Jersey company that has been spurned twice by federal courts in its attempt to rid itself of such lawsuits, is making another run at it using what lawyers refer to as the corporate “Texas two-step” bankruptcy. The strategy would use a new subsidiary to take on its talc debts, which then seek Chapter 11 protection. The idea is to bring together the lawsuits and put them in a single resolution, shielding J&J as a corporation from outright bankruptcy.
A bankruptcy judge can approve a global settlement that includes releasing all such claims and preventing future claims. Outside bankruptcy, J&J would still be subject to lawsuits from holdouts or new plaintiffs with the prospect of large verdicts in the billions of dollars.
J&J sought pre-approval from plaintiffs of its proposed settlement on its third bankruptcy attempt in order to bolster it. The court imposes the deal on all claimants if over 75% of plaintiffs support it.
Narrowed Focus on Cancer Claims
Another difference from its past bankruptcy filings — this time J&J grants substantial participation to ovarian and other gynecological cancer claims. The agreement follows earlier settlements J&J made with state attorneys general and mesothelioma victims, a cancer associated with asbestos.
J&J pledged an additional $1.1 billion to the fund earlier this month and agreed to pay $650 million in legal fees for plaintiffs’ lawyers who had fought it on behalf of states that rejected the deal. The Company continues to be opposed by some lawyers and faces ongoing legal challenges.
J&J Subsidiary $10 Billion Bankruptcy: Legal Hurdles
Even with the progress made, J&J’s bankruptcy strategy faces several hurdles. Those include a June U.S. Supreme Court decision on Purdue Pharma’s bankruptcy and past court rulings tossing out J&J-related requests. Proposed federal legislation aimed at preventing financially robust companies like J&J from utilizing bankruptcy protection also poses a potential challenge.
J&J’s Talc Litigation Extends Beyond Baby Powder
The legal fallout involving Johnson & Johnson and its talc products stretches beyond baby powder. In a related case, an independent jury gave a Utah couple more than $39 million in a landmark mesothelioma lawsuit. Meanwhile, a case brought to trial in Massachusetts involved the administration of talc tainted with asbestos as part of a medical procedure.
The case was filed in 2015 by the plaintiffs, Bryce and Diane Zundel, who claimed that Bryce developed mesothelioma after exposure to talc from a pleurodesis performed on him in 2014. A Chinese mine from which Boston Medical Products Inc. obtained the talc used in its products was later determined to be the source of an asbestos-contaminated version of the mineral.
Groundbreaking Verdict in Medical Device-Related Talc Case
The Zundel case marks the first-ever win relating to medical procedure-using talc. While different from the baby powder litigation against J&J, it highlights the larger concern over asbestos in talc. The jury gave Zundel’s wife $39 million, including $12.25m for loss of consortium.
Key to the case was expert testimony, as plaintiffs’ experts outlined how asbestos causes cancer and how the talc that formed one of the act’s ingredients was contaminated. The defense, on the other hand, argued that the company had no knowledge of talc being used in a medical context.
Implications for J&J’s Broader Legal Strategy
While J&J was not a defendant in the Zundel case, this verdict adds to the growing pressure on the company as it faces tens of thousands of similar claims regarding asbestos in its talc products. The company’s ongoing bankruptcy efforts to settle lawsuits through a $10 billion fund could potentially cover not just claims related to consumer products like baby powder but also cases like the Zundels’, which involve medical device usage of talc.
The Zundel case reinforces the risks associated with talc and raises new concerns for the medical community about its use in procedures. This further complicates J&J’s legal landscape as it continues to navigate multiple lawsuits, not just from consumers but potentially from patients treated with talc in medical settings.
