J&J unit files for second bankruptcy to pursue $8.9 billion talc settlement
Business
The amount dwarfs J&J’s original offer of $2 billion
WASHINGTON (Reuters) - Johnson & Johnson has agreed to pay $8.9 billion to settle tens of thousands of lawsuits alleging that talc in its iconic Baby Powder and other products caused cancer, the company said. The amount dwarfs J&J’s original offer of $2 billion.
The agreement follows a January appeals court ruling invalidating J&J’s controversial “Texas two-step” bankruptcy maneuver, in which it sought to offload the talc liability onto a subsidiary that immediately filed for Chapter 11.
The J&J subsidiary, LTL Management, filed for bankruptcy protection late Tuesday for a second time with the intent to present a reorganization plan containing the proposed settlement to a judge as soon as May 14, the subsidiary said in a court filing. J&J said in a statement that about 60,000 talc claimants had agreed to the proposal.
The J&J subsidiary filed for bankruptcy in New Jersey, the same jurisdiction where it faced the appeals court defeat. J&J crafted new financing arrangements with its subsidiary to avoid running afoul of the appeals ruling, the subsidiary said in a court filing. The ruling determined LTL Management had no legitimate claim to bankruptcy because it was not in financial distress.
The appeals court rejection effectively raised the price tag for J&J to rid itself of the sprawling talc litigation, after plaintiffs’ lawyers had resisted the company’s tactics and prevailed. J&J’s board met over the weekend and approved paying the vastly larger settlement to current and future plaintiffs with various gynecological cancers and mesothelioma, according to Mikal Watts, one of the plaintiffs’ lawyers who negotiated the agreement.
J&J reiterated on Tuesday that its talc products are safe and do not cause cancer. Company lawyers said talc claims lacked scientific merit and accused plaintiffs’ lawyers of continuing to advertise for clients in the hopes of extracting large financial sums.
The company still faces significant risk that other plaintiffs could continue to oppose the settlement and appeal the case again to the same court that has already rejected the subsidiary bankruptcy — the 3rd U.S. Circuit Court of Appeals in Philadelphia.
Attorneys representing thousands of plaintiffs issued a release late Tuesday opposing the settlement. “This sham deal does not even pay for most victims’ medical bills,” said Jason Itkin, founding partner of the Houston-based personal injury law firm Arnold & Itkin LLP.
