Crucial Hearing for Finalizing J&J Talc Settlement Begins
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A key bankruptcy confirmation hearing began today for the finalization of Johnson & Johnson’s $8 billion talc settlement.
J&J first proposed the settlement in September. This settlement is an attempt to resolve the tens of thousands of talcum powder lawsuits claiming the company’s products are tied to ovarian cancer. The company is relying on the bankruptcy of its subsidiary, Red River Talc, to complete the settlement.
The hearing is taking place in Texas bankruptcy court and will cover several key issues. Meanwhile, J&J is facing pushback against the settlement from multiple camps.
Front and center will be the company’s use of a Texas Two-Step bankruptcy. In this controversial practice, the company forms a subsidiary to take on the related tort liabilities. This subsidiary then files for Chapter 11 in place of the main company.
The U.S. Trustee, which is part of the Department of Justice and serves as the federal government’s bankruptcy watchdog, has heavily fought against this strategy.
“This is a case that was filed in bad faith by a shell entity that has no valid restructuring purpose or need for bankruptcy relief,” the program said in an objection it filed to Red River Talc’s bankruptcy.
J&J attempted a Texas Two-Step to resolve the talc litigation twice before, in 2021 and 2023, but failed both times. The company hopes a new venue and more support from affected plaintiffs will make a difference this time.
Plaintiff Support for Settlement To Be Key Issue at Hearing
In September, Johnson & Johnson announced its new settlement offer. It boasted a high level of support among plaintiffs impacted by it.
The company said that it had the support of 83% of all plaintiffs, comfortably ahead of the 75% threshold required by the U.S. Bankruptcy Code.
But holdouts who have not agreed to the settlement claim that number may be inaccurate. The Coalition of Counsel for Justice for Talc Claimants, representing the holdouts, has claimed that there were voting irregularities. According to the coalition, the 75% threshold has not truly been met.
In an objection, the coalition stated to the bankruptcy that it would demonstrate in trial why the voting total reported by J&J is inaccurate.
As of this month, there are nearly 60,000 active lawsuits over claims that J&J’s talc-based baby powder causes ovarian cancer. Separate claims that the company’s baby powder contained asbestos or caused mesothelioma are not part of the settlement.
Government Departments Oppose J&J Talc Settlement
Johnson & Johnson’s talc settlement is also facing open opposition from two government departments.
The Departments of Health and Human Services (HHS) and Veterans Affairs (VA) filed an objection to the bankruptcy last month. This objection cited their right to reimbursement.
These departments oversee Medicare, Medicaid and health care for veterans. They claim that approval of the settlement would disrupt their ability to be reimbursed for the medical expenses they paid for patients who may have been affected by J&J’s talc.
According to Reuters, HHS alone may seek over $1 billion in reimbursements.
The bankruptcy hearing is set to last more than a week.
Editor Lindsay Donaldson contributed to this article.