A Johnson & Johnson (J&J) subsidiary filed for bankruptcy on Friday, marking its third attempt to resolve tens of thousands of lawsuits alleging its baby powder and other talc products caused cancer.
The move is part of J&J’s effort to advance an approximately $8 billion proposed settlement, to be paid over 25 years.
According to the company, its subsidiary Red River Talc LLC submitted its bankruptcy filing on Sept. 20 in the U.S. Bankruptcy Court for the Southern District of Texas.
J&J currently faces over 62,000 lawsuits from individuals claiming its talc-based products were contaminated with asbestos and caused ovarian cancer and other forms of the disease.
J&J has consistently denied these allegations, maintaining that its products are safe.
“The Company reiterates that none of the talc-related claims against it have merit. The claims are premised on allegations that have been rejected by independent experts, as well as governmental and regulatory bodies, for decades,” J&J wrote in a Sept. 20 press release on the development.
‘Texas Two-Step’
The New Brunswick, New Jersey-based company is once again attempting to resolve the litigation through a strategy known as the “Texas two-step” bankruptcy, which involves transferring talc liabilities to a newly formed subsidiary, which then files for Chapter 11 bankruptcy.
According to J&J, the Red River unit proceeded with the bankruptcy filing after securing support from approximately 83 percent of current claimants for their proposed bankruptcy plan, which required 75 percent of votes for a bankruptcy judge to enforce the deal, they said.
“The overwhelming support for the Plan demonstrates the Company’s extensive, good-faith efforts to resolve this litigation for the benefit of all stakeholders,” Erik Haas, Worldwide Vice President of Litigation for J&J, said in the recent press release.
The two-step approach allows the company to consolidate all claims into a single settlement without J&J filing for bankruptcy itself.
According to the press release, the plan would resolve 99.75 percent of all pending lawsuits against J&J and its affiliates in the United States regarding their talc products. The remaining 0.25 percent of lawsuits related to mesothelioma are being handled under a separate plan.
The settlement builds on earlier ones J&J reached with state attorneys general and individuals who filed lawsuits after being diagnosed with mesothelioma, a rare cancer associated with asbestos exposure.
They said the plan is in the “best interest” of claimants, who will have a “far better” chance of recovering settlements than through trial, where J&J has prevailed in 95 percent of all ovarian trial cases, according to their recent announcement.
If approved, the settlement will be paid out over 25 years and total around $8 billion.
J&J’s bankruptcy plan has faced various legal obstacles, including a recent June decision by the U.S. Supreme Court concerning Purdue Pharma’s bankruptcy, prior court rulings dismissing its earlier attempts, and proposed federal legislation preventing financially stable companies from leveraging bankruptcy protections.
One attorney against the deal, Andy Birchfield, told Reuters J&J’s latest move is taking advantage of the bankruptcy process.
“We view this so-called vote as another fraudulent effort by J&J to manipulate the bankruptcy process and minimize the legitimate claims of ovarian cancer victims,” Birchfield said in a recent interview.
Others say they’re for the deal, including lawyer Allen Smith, who once represented 11,000 claimants in a partnership with Birchfield’s law firm.
Smith said the settlement “finally provides my clients reasonable and fair compensation” in the settlement process.
Reuters contributed to this report.