Will J&J’s Latest Talc Bankruptcy Plan Succeed? Several Factors at Play
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Johnson & Johnson is making another run at completing a bankruptcy plan to settle the tens of thousands of talcum powder lawsuits against the company and its baby powder. The pharmaceutical giant is offering a settlement worth around $8 billion, to be paid out over 25 years, and has received the support of most plaintiffs.
But will this plan have more success than the company’s previous two attempts?
So far, J&J has been unsuccessful as it continues to employ a Texas two-step strategy to settle talcum powder litigation. In this type of bankruptcy, a subsidiary is created to take on the parent company’s liabilities and file for bankruptcy on its behalf.
Although this strategy is critical to J&J’s plan to address the baby powder lawsuits, the Texas two-step tactic is a murky area of bankruptcy law. Some U.S. Senate members are actively working to ban this maneuver.
But there are several differences between this attempt and J&J’s previous efforts that the company hopes will help result in a different outcome.
Increased Payout Amount Could Help J&J Settlement Succeed
When J&J first announced its latest plan in May, it proposed a settlement worth about $6.5 billion to be paid out over 25 years.
That offer has improved in the months since, helping build plaintiff support and possibly creating an easier path to approval from a judge.
Earlier this month, the company added over $1 billion to its settlement to gain more support. This pushed it to around $8 billion in total.
This larger settlement has garnered more plaintiff support, helping to eliminate some opposition to the proposal.
Plaintiff Support for Ovarian Cancer Settlement is Significant
Another argument that J&J hopes will help it to see more success on this bankruptcy attempt is the significant support from plaintiffs for the settlement to be completed.
J&J said in a release that 83% of claimants support the settlement, comfortably above the 75% threshold required by the U.S. Bankruptcy Code.
The company has been working to increase support of the plan for months. Previously, DrugWatch reported that the key 75% threshold was achieved in a secret ballot in July.
Support also grew significantly after the company tacked on additional money in early September. A key plaintiffs’ lawyer representing 12,000 clients agreed to support the proposal at that time.
J&J Hopeful to Have More Success in a Texas Court
J&J’s subsidiary – rechristened as Red River Talc – filed for bankruptcy in Texas court, likely in part to avoid the unfavorable rulings New Jersey courts have repeatedly handed down.
But the venue of the case could still be in flux.
According to Reuters, several opponents of the settlement, including the Justice Department’s bankruptcy watchdog, are pushing for the bankruptcy case to be taken over by the New Jersey judge, Judge Michael Kaplan, who had thrown out J&J’s previous bankruptcy attempts.
But Kaplan said on Tuesday that he would not immediately take control of the case, allowing it to remain in Texas for the time being.
J&J would be unlikely to see a favorable result if the bankruptcy proposal were to end up once again in front of Kaplan.
Editor Lindsay Donaldson contributed to this article.