As a federal supreme court shut down Johnson & Johnson’s third attempt at bankruptcy to settle thousands of talc ovarian cancer lawsuits in federal and state courts, sources say the health care giant may have received enough plaintiff votes in favor of its $6.5 billion settlement offer.
The baby powder maker faces about 61,000 lawsuits that claim the company’s talc products led people to develop ovarian cancer and mesothelioma, and 57,782 of those cases are pending in federal multidistrict litigation in New Jersey district court.
The deadline for plaintiffs to vote on whether they would accept a $6.5 billion talc settlement was July 26, 2024, and Bloomberg’s anonymous sources say that J&J reached the 75% threshold to move forward with the settlement. The settlement is only for claims for ovarian cancer and doesn’t affect talc claims for mesothelioma.
J&J previously said it was confident it would reach the 75% threshold. However, the voting results haven’t been certified and are still being tallied, Reuters reported.
Appeals Court Denies Third Bankruptcy Attempt
The night before the $6.5 billion settlement voting deadline, the Third U.S. Circuit Court of Appeals upheld the decision to dismiss the company’s third bankruptcy attempt, further complicating J&J’s efforts to end talcum powder litigation for ovarian cancer.
The court claimed J&J’s subsidiary, LTL Management, had only presented “speculative” evidence that the financial burden of talc lawsuits created enough “financial distress” to qualify for bankruptcy, according to Reuters.
J&J’s vice president of litigation, Erik Haas, said the company intends to appeal the dismissal with the U.S. Supreme Court.
The health care giant stands by its products and denies a link between its talc products and ovarian cancer.
‘Fake Bankruptcy Election’
J&J faces strong pushback from lawyers who represent plaintiffs who oppose the settlement. One attorney, Andy Birchfield, called the settlement voting process a “fake bankruptcy election” that would not hold up in court, Reuters reported.
“No matter what tally is announced, I expect it will be challenged and eventually rejected so that juries can decide what to do about J&J’s egregious conduct,” Birchfield told Reuters.
Plaintiffs’ lawyers say this third bankruptcy attempt should fail because J&J hasn’t proved that LTL Management is in “financial distress.” Courts dismissed the last two attempts for the same reason.
Legislation Aims to Stop Corporate Abuse of Bankruptcy Law
Another potential hurdle in J&J’s strategy is that the U.S. Congress proposed legislation called the Ending Corporate Bankruptcy Abuse Act of 2024, a bipartisan bill aimed at stopping corporate bankruptcy abuses and allowing victims to have their day in court.
The bill would limit companies’ ability to protect themselves from lawsuits by using the so-called Texas-two-step bankruptcy strategy. The Texas-two-step is a strategy where companies create shell companies to shield themselves from liability and put those companies into bankruptcy in the same way J&J has created LTL Management for its talc liabilities.
“Corporations have sidestepped accountability through dishonest bankruptcy maneuvers for far too long,” Senate Majority Whip Dick Durbin, co-author of the bill and Chair of the Senate Judiciary Committee, said in a July 2024 press release. “Maneuvers like the Texas Two-Step allow big corporations to avoid taking responsibility for the harms their products inflict on Americans, which we’ve seen with asbestos in Georgia-Pacific drywall, cancer-causing Johnson & Johnson baby powder, and more. It’s time for our bipartisan bill to curb this bankruptcy trick and give victims their day in court.”