Courtroom, Gavel And Law Books

Johnson & Johnson Considers a Third Talc Bankruptcy to Avoid Further Litigation

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With more than two dozen jury trials scheduled over the next year involving contaminated talc claims related to its ubiquitous baby powder, discussions are already at Johnson & Johnson to puts its talc unit, LTL Management, back into bankruptcy for a third time.

J&J’s worldwide vice president of its talc litigation, Erik Haas, revealed during an October 17 earnings call the company is considering using another bankruptcy in hopes of pushing forward with an estimated $8.9 billion settlement of the thousands of claims alleging that J&J’s baby powder lead to cancer and mesothelioma.

Haas stated that J&J is “pursuing a consensual resolution of the talc claims through another bankruptcy,” while continuing, in the meantime, to “vigorously defend itself” in the remaining talc cases. A quick search reveals J&J as a named defendant in talc-related cases set for trial from California all the way to Pennsylvania, many of which have been consolidated by dozens of plaintiffs. These trial dates were quickly set after a judge in July rejected J&J’s second Chapter 11 attempt, citing a lack of financial distress shown by J&J. Incidentally, Haas mentioned that J&J is seeking to appeal this ruling to the U.S. Supreme Court.

Strategically, filing another bankruptcy for J&J’s LTL Management subsidiary would allow J&J to ask a judge to slam the brakes on all trials while the company once again attempts to negotiate settlements with the lawyers of these plaintiffs. That was exactly the outcome with the first two Chapter 11 filings by LTL Management, which had hoped those prior filings would force a talc settlement by setting up a trust to pay victims. U.S. Chapter 11 rules allow corporations to put money into trusts that determine how much individual claimants should be paid, rather than letting a jury decide.

A vote on a possible third bankruptcy filing is expected in the next six months, according to Haas, to “determine whether the requisite supermajority of claimants support the plan.” J&J would then need to win the backing of more than 75 percent of the active claimants to create a trust to settle lawsuits.

Based in New Brunswick, N.J., J&J faces at least 51,000 lawsuits claiming talc used in its baby powder and similar products caused cancer, many of which have been consolidated before a New Jersey federal judge for pre-trial discovery exchanges.

J&J created LTL Management in October 2021 shortly before the company filed its first bankruptcy filing in North Carolina in an attempt to effectuate settlements with the then-pending thousands of cancer claims from the company’s cosmetic talc products, most notably J&J’s baby powder. All of the claimants make the same claims: That J&J’s cosmetic products were contaminate with asbestos, which caused them to develop, among other diseases, mesothelioma and ovarian cancer.

Attorneys representing these claimants allege that J&J’s executives have known since the early 1970s that its talc-based cosmetic products contained small amounts of asbestos but failed to alert its consumers or product regulators. J&J has always contended that its cosmetic talc products do not cause cancer and are safe. It then, however, pulled all of its talc-based powders off the U.S. market in 2020 and replaced them with cornstarch-based versions.

While J&J considers a third attempt at bankruptcy, J&J faces trial next in November in Oakland, Calif. state court for claims involving its baby powder causing mesothelioma in a plaintiff. The last time J&J took a talc claim to trial in this state court it was hit by an $18.8 million verdict. While J&J has appealed that verdict, the cause for J&J’s concern is real.

After that, J&J faces additional trials involving ex-talc users in New Jersey in March and August 2024, in Mississippi in April 2024, and in Philadelphia in the fall of 2024. The consolidated federal talc case is: In re Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation, 16-md-2738, U.S. District Court for the District of New Jersey (Trenton).