J&J Baby Powder Settlement Sees Win with Bankruptcy Case Staying in Texas
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The moment Johnson & Johnson used a subsidiary to file for bankruptcy in Texas court last month, uncertainty surrounding the case’s venue has swirled. Red River Talc – the subsidiary in question – filed for Chapter 11 as part of a plan to complete an $8 billion settlement for ovarian cancer lawsuits against J&J and its talcum powder.
The U.S. Department of Justice’s bankruptcy watchdog, and some attorneys, have pushed for the settlement case to be moved to the New Jersey court where J&J’s past attempts at this type of bankruptcy had failed.
However, the case will stay put after all, increasing the likelihood of J&J completing its settlement. According to Reuters, Judge Christopher Lopez opted to allow the bankruptcy case to remain in Texas due to differences between this case and past settlement attempts.
J&J is attempting what is known as a Texas two-step bankruptcy strategy, where a newly formed subsidiary takes on a company’s lawsuit liabilities and then files for bankruptcy, insulating the main company.
J&J had previously tried this approach in New Jersey court with a subsidiary called LTL Management but, despite multiple attempts, failed to gain approval from a judge.
Now, J&J may be closer than ever to settling thousands of lawsuits from people claiming they developed ovarian cancer after using the company’s talc-based baby powder.
What Makes J&J’s Latest Talc Bankruptcy Attempt Different
Judge Lopez allowed the bankruptcy case to remain in Texas because it differs from J&J’s past attempts in New Jersey court.
One of the biggest differences is support from plaintiffs. The U.S. Bankruptcy Code requires that 75% of plaintiffs approve of a settlement plan before it can be approved, and J&J worked for months to get well above that number.
The required number of plaintiffs was likely hit in a secret ballot that ended in July, but the company still pushed for more support from there. In September, it added more than $1 billion to its initial settlement offer, gaining further support for its plan.
When Red River Talc filed for bankruptcy a few weeks later, J&J boasted that its $8 billion settlement is supported by 83% of plaintiffs.
“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, said in a statement. “This Plan is fair and equitable to all parties and, therefore, should be expeditiously confirmed by the Bankruptcy Court.”
As of this month, there are over 58,000 pending talcum powder lawsuits against J&J. In 2020, the company discontinued the sales of its talc-based baby powder in the U.S., before discontinuing worldwide sales just a few years later.
The pending settlement applies to cases that tie the use of talc powder to ovarian cancer, but it does not cover cases relating to mesothelioma. Testing revealed asbestos in samples of J&J baby powder in 2019.
Despite not being part of the settlement, plaintiffs claiming they developed mesothelioma from the company’s baby powder have seen some big wins in state court. In August, a South Carolina jury awarded $63.4 million to a man who used J&J powder in place of deodorant for years before being diagnosed with mesothelioma.
Editor Lindsay Donaldson contributed to this article.