In a significant development in the ongoing legal saga surrounding Johnson & Johnson’s (J&J) talc products, a U.S. judge has rejected the company’s second attempt to resolve tens of thousands of lawsuits through bankruptcy.
This decision puts a proposed $8.9 billion settlement in jeopardy and potentially opens the door for new lawsuits to be filed.
The Judge’s Ruling
U.S. Bankruptcy Judge Michael Kaplan, based in Trenton, New Jersey, ruled that a J&J company’s second bankruptcy filing, like its first, must be dismissed. The reason? The talc lawsuits did not put the company in immediate “financial distress.”
Kaplan wrote, “In sum, this Court smells smoke, but does not see the fire,” referring to the J&J unit LTL. “Therefore, the emphasis on certainty and immediacy of financial distress closes the door of chapter 11 to LTL at this juncture.”
J&J has announced that it will appeal Kaplan’s decision and stated that it would vigorously defend itself against lawsuits that are “specious and lack scientific merit.”
The company’s first bankruptcy gambit began in 2021 when it offloaded its talc liabilities into a new company, LTL Management, and immediately placed that company into bankruptcy. LTL’s first bankruptcy was dismissed in April after a U.S. appeals court ruled that it was not in sufficient financial distress to be eligible for bankruptcy protection.
The Talc Controversy
The talc lawsuits allege that J&J’s baby powder and other talc products sometimes contained asbestos and caused mesothelioma, ovarian cancer, and other cancers. J&J has consistently maintained that its talc products are safe and do not contain asbestos.
Attorneys representing people with cancer and the U.S. Justice Department’s bankruptcy watchdog had called for LTL’s second bankruptcy to be dismissed as an abuse of U.S. bankruptcy law. Andy Birchfield, an attorney representing cancer victims, said the second bankruptcy was meant to keep the talc lawsuits from being heard by juries.
“J&J has spent two years trying to convince us that somehow a company worth a half-trillion dollars is bankrupt,” Birchfield said. “It’s time for the nonsense to stop and for J&J to accept responsibility.”
The Ruling’s Implications
This ruling has significant implications for J&J and the ongoing talc lawsuits. The company argued that the proposed bankruptcy settlement offers a fairer and faster resolution for cancer claimants than litigation in other courts.
However, plaintiffs’ lawyers who opposed the $8.9 billion offer said J&J had created the “illusion” of support by signing deals with plaintiffs’ lawyers who quickly signed up large numbers of clients without ever filing any lawsuits against J&J.
The repeated bankruptcy proceedings have largely paused the 38,000 lawsuits filed before October 2021. However, Kaplan allowed one case to proceed to trial during LTL’s second bankruptcy, resulting in an $18.8 million verdict in favor of a California man who said he developed cancer from exposure to J&J baby powder.
As J&J plans to appeal the decision, the legal battle surrounding its talc products is far from over. The outcome of this case could set a precedent for how companies handle mass tort litigation in the future. For now, the focus remains on J&J as it navigates the complex legal landscape surrounding its talc products.