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Johnson & Johnson said on Wednesday that it would ask tens of thousands of people suing the company over claims that its talcum powder products caused their cancer to approve a new $6.5 billion settlement, its third attempt to resolve the lawsuits.
The proposal would settle nearly all current and future claims that its talcum powder products caused ovarian cancer, the company said. Like the previous two efforts — in 2021 and 2023 — the new deal will try to use an element of the bankruptcy system to settle the claims.
Judges have rejected the two previous attempts, on the grounds that bankruptcy court isn’t the right venue for them. Johnson & Johnson has said it plans to appeal its most recent bankruptcy rejection up to the Supreme Court, but the company on Wednesday didn’t specify why it thought the new effort would survive similar legal challenges to previous ones.
Representatives for Johnson & Johnson declined to comment beyond its announcement.
The company has been trying to end a more than a decade-long legal saga over its liability over baby powder, one of its most recognizable products, which thousands claim caused their ovarian cancer and mesothelioma because it is contaminated with asbestos. The company has long denied those claims, but has in recent years stopped selling talc-based baby powder worldwide.
Last year, Johnson & Johnson proposed an $8.9 billion settlement to resolve 40,000 suits through a subsidiary created in 2021 to absorb the liability from its talc powder lawsuits. The plan was to have the unit file for bankruptcy protection — turning to the court to then disburse the settlement.
Lindsey Simon, a bankruptcy professor at Emory University School of Law, said the reason bankruptcy court was an appealing way to settle mass litigation was that it allowed a company to end cases from claimants who did not agree to its offer, and also from future claimants.
“The ability of bankruptcy law to force that 25 percent to accept a deal impacting their rights — current and future claimants — that’s strong medicine,” she said. “That’s a heavy benefit that’s not given lightly. Once it’s done there’s no going back.”
A judge rejected that bankruptcy request in July, saying that Johnson & Johnson was not actually in any financial distress, a key requirement for filing for bankruptcy. The first attempt to resolve the issue in bankruptcy was blocked by a judge for the same reason.
The latest settlement also depends on a Chapter 11 reorganization, by a unit called LLT Management. The company, previously known as LTL Management, was recently reincorporated in Texas, where Johnson & Johnson is poised to file, from New Jersey. Texas courts have in the past taken more lenient stances on the standard for when a company can file for bankruptcy.
Under the new proposal, claimants would have three months to vote on the plan. If 75 percent of claimants vote in favor, a “prepackaged” Chapter 11 bankruptcy will be filed.
Erik Haas, the head of litigation at Johnson & Johnson, said in the statement on Wednesday that putting the offer to the claimants avoided “the conflicting financial incentives of the small minority of plaintiff lawyers who stand to receive excessive legal fees outside of a reorganization.”
Andy Birchfield, a lawyer at Beasley Allen Law Firm who represents claimants, said in a statement on Wednesday that “any bankruptcy based on this solicitation and vote will be found fraudulent and filed in bad faith under the Bankruptcy Code.”
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