Johnson & Johnson has filed for bankruptcy
Johnson & Johnson has initiated its third bankruptcy proceeding in an effort to resolve ongoing talc-related litigation.
Johnson & Johnson has initiated an extraordinary third chapter 11 filing aimed at resolving the extensive litigation associating its cosmetic talc products with cancer. This latest move is supported by tens of thousands of personal-injury claimants, proposing a compensation scheme estimated at approximately $8 billion.
The healthcare-products firm is making another attempt to resolve the protracted talc litigation through bankruptcy following two unsuccessful efforts. The recent chapter 11 filing will once more assess whether financially robust companies like J&J can leverage the chapter 11 framework to address legal challenges arising from purportedly hazardous or faulty products.
Johnson & Johnson initiated its inaugural chapter 11 case concerning talc liabilities in 2021 in Charlotte, North Carolina, followed by a second case last year in Trenton, New Jersey, and a third in Houston.
Friday’s filing effectively suspends over 62,000 talc lawsuits currently active in courts nationwide, paving the way for J&J to address these claims in a consolidated manner within a single forum.
The bankruptcy comes after an extended campaign by J&J to garner backing from injury plaintiffs for an approximately $8 billion compensation scheme addressing allegations that its renowned baby powder harbored cancer-inducing asbestos. The firm has refuted claims regarding the safety of its talc products, attributing the surge in talc-related lawsuits to misleading legal advertising and unethical trial attorneys.
Should the company’s proposal receive the green light from bankruptcy court, it would effectively settle all existing and prospective litigation connecting its talc products to ovarian and other gynecological cancers, a conclusive resolution that Johnson & Johnson cannot achieve through any other means than bankruptcy proceedings.
Claimants who rejected the proposal from J&J would nonetheless be subject to its stipulations, thereby allowing the company to mitigate the potential for substantial jury-trial awards, such as the $2.1 billion verdict it disbursed to a cohort of 20 ovarian-cancer plaintiffs in 2021. Individuals who may seek claims in the future—specifically, those who have used talc and are not presently ill but could potentially develop cancer—would also fall under the provisions of the plan, thereby precluding them from seeking recourse against J&J through the civil justice system.
According to the company’s announcement on Friday, approximately 83% of the women who participated in the voting on the recent offer expressed their approval. Johnson & Johnson announced that its strategy would entail disbursements reaching $10 billion over a quarter-century, equating to a present value of $8 billion.
Nonetheless, J&J will continue to encounter legal obstacles regarding its approach, referred to as the Texas Two-Step. The company transferred its talc-related liabilities in 2021 to a corporate affiliate specifically structured to pursue chapter 11, thereby enabling it to access the legal safeguards of bankruptcy while preserving its valuable business assets from the chapter 11 process.
Talc plaintiffs are anticipated to closely examine the voting outcomes and challenge the company’s selection of Houston as its most recent bankruptcy location. Johnson & Johnson will confront a pivotal issue regarding the fundamental capacity of a solvent enterprise to utilize bankruptcy proceedings.
