DOJ Files Motion to Halt J&J Talc Settlement
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The Department of Justice is making a renewed run at thwarting Johnson & Johnson’s attempt to settle thousands of talc-related ovarian cancer lawsuits.
The United States Trustee program, the part of the DOJ that oversees bankruptcy cases, filed a motion on Monday to dismiss a bankruptcy case necessary to complete J&J’s proposed $8 billion talc settlement.
Red River Talc — a J&J subsidiary that was formed to handle its parent company’s baby powder litigation — filed for Chapter 11 in September as it made use of what is known as a Texas two-step bankruptcy, where a subsidiary takes on a company’s liabilities and files for bankruptcy in its place.
The DOJ has fought against this method of bankruptcy, which is considered to be controversial.
“J&J’s tactics are a textbook example of bad faith,” U.S. Trustee Kevin Epstein said in the motion to dismiss. “[Red River Talc] has no need for bankruptcy relief and it had no valid restructuring purpose when it filed its bankruptcy petition.”
The decision will ultimately lie with Judge Christopher Lopez, who is overseeing the bankruptcy case in Texas court. J&J is hopeful that its settlement attempt will succeed, in part due to the significant support among plaintiffs.
J&J Hoping for Different Result from Previous Talc Settlement Tries
This is not J&J’s first attempt to handle the expansive talcum powder litigation pending against the company with a Texas two-step bankruptcy. But its previous attempts did not see success.
J&J has tried twice in New Jersey court to complete a settlement in similar fashion through its subsidiary LTL Management but, according to Reuters, those attempts failed. Judge Michael Kaplan determined that the subsidiary didn’t demonstrate the level of financial stress necessary to warrant bankruptcy.
While J&J’s latest settlement case is in a different court, it holds some similarities to past attempts.
“For the third time in as many years, the Johnson & Johnson Company … seeks to use the bankruptcy process to immunize itself from billions of dollars of personal injury liability without actually subjecting itself to bankruptcy,” the new U.S. Trustee motion stated.
But things have already begun to play out differently during the company’s new attempt in Texas.
The DOJ lost a bid two weeks ago to send the case to the New Jersey court where J&J’s previous tries had failed. Instead, Judge Lopez allowed the case to remain in Texas.
In addition to the new venue, different judge and new subsidiary, J&J is also counting on sizable support from plaintiffs to help swing things in its direction. The company previously reported that 83% of claimants back the agreement.
Potential Settlement Could Resolve Thousands of Ovarian Cancer Lawsuits
Johnson & Johnson has been subject to a massive number of lawsuits in recent years claiming that the company failed to warn of health risks tied to its talc-based baby powder. As of this month, more than 58,000 talcum powder lawsuits were pending in multidistrict litigation.
Adverse health effects like ovarian cancer and mesothelioma have been blamed on the use of the powder, which J&J discontinued sales of in North America in 2020.
If approved, the settlement would cover lawsuits related to ovarian cancer, which make up the vast majority of the baby powder litigation against the company.
According to Law.com, Judge Lopez ordered an automatic stay on talc litigation after Red River filed for bankruptcy, halting progress of those lawsuits for now.
While the settlement would resolve ovarian cancer lawsuits if approved, litigation linking mesothelioma to J&J baby powder could continue. Plaintiffs have seen some sizable wins among those lawsuits, with a South Carolina man who developed mesothelioma awarded $63.4 million by a jury in August.