FILE PHOTO: A Johnson & Johnson banner is displayed on the front of the New York Stock Exchange (NYSE) in New York City, in New York City, U.S., December 5, 2023. REUTERS/Brendan McDermid/File Photo
New York: A Johnson & Johnson (J&J) subsidiary has filed for bankruptcy for a third time as the healthcare giant seeks to advance an approximately US$10bil proposed settlement that would end tens of thousands of lawsuits alleging that the company’s baby powder and other talc products caused cancer.
J&J faces lawsuits from more than 62,000 claimants who alleged that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers.
To stop those lawsuits, J&J subsidiary Red River Talc filed for bankruptcy protection in a federal bankruptcy court in Houston, last Friday.
The company has denied the allegations and has called its products safe.
Erik Haas, J&J’s worldwide vice-president of litigation, said last Friday that the settlement is “fair and equitable to all parties” and that 83% of current talc claimants voted for it.
The settlement proposal has divided attorneys who represent cancer victims. Opponents of the deal said they will quickly ask the court to dismiss the bankruptcy or transfer it to New Jersey, where courts have twice rebuffed J&J’s attempts to end the litigation in a so-called “Texas two-step” bankruptcy.
Andy Birchfield, an attorney opposed to the deal, said that J&J is gaming the bankruptcy system in an attempt to underpay tens of thousands of cancer victims.
“We view this so-called vote as another fraudulent effort by J&J to manipulate the bankruptcy process and minimise the legitimate claims of ovarian cancer victims,” Birchfield said.
Other attorneys spoke in support of the deal, including Allen Smith, a lawyer who had previously represented 11,000 claimants in partnership with Birchfield’s law firm.
Smith said the settlement offer “finally provides my clients reasonable and fair compensation. It’s now time to go to work and get them compensated as soon as possible”.
The “two-step” manoeuvre employed by J&J involves offloading liabilities onto a newly created subsidiary that then declares Chapter 11, a type of bankruptcy that involves a reorganisation of assets and debts under court supervision.
The goal is to use the proceeding to force all plaintiffs into one settlement, without requiring J&J itself to file for bankruptcy.
Bankruptcy judges can enforce global settlements that permanently halt all related lawsuits and forbid new ones.
Outside of bankruptcy, any settlement J&J reached with some claimants would still leave holdouts or future plaintiffs with the right to sue – and leave the company exposed to potential multibillion-US dollar verdicts that encouraged it to use a two-step in the first place. — Reuters
