Hearing Key to Completion of J&J Talc Settlement Gets Underway
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A confirmation hearing for Johnson & Johnson’s $8 billion talc settlement will begin today in Texas bankruptcy court.
The hearing is set to last more than a week and will decide whether J&J can use a controversial bankruptcy strategy to resolve tens of thousands of active talcum powder lawsuits.
If approved, lawsuits claiming that the company’s talc-based baby powder caused ovarian cancer in some users would be settled, with payments made over a 25-year period. J&J has said that its offer has the support of 83% of people who have active lawsuits.
But its approval is far from a guarantee. J&J has received significant pushback from multiple government departments as well as settlement holdouts.
The hearing is set to address several key issues at the heart of the bankruptcy plan.
J&J’s Use of Controversial Texas Two-Step Procedure Will Be Key Issue
Johnson & Johnson aims to complete its settlement through a Texas Two-Step bankruptcy. This will be one of the primary issues of the hearing.
In this type of bankruptcy, a subsidiary is formed to take on the related liabilities of the primary company, filing for Chapter 11 in its place. J&J formed a subsidiary called Red River Talc, which is declaring bankruptcy, for this purpose.
It is a controversial strategy that has drawn the ire of the U.S. Trustee, a part of the Department of Justice that serves as the government’s bankruptcy watchdog.
The U.S. Trustee filed a motion to dismiss Red River Talc’s bankruptcy in October shortly after it was first filed, and went on to then file an objection against the plan last month.
“This is a case that was filed in bad faith by a shell entity that has no valid restructuring purpose or need for bankruptcy relief,” the program said in its objection.
This is also not the first time that Johnson & Johnson has attempted to use the Texas Two-Step in hopes of ending the ongoing talcum powder litigation. Two previous attempts were made in 2021 and 2023 with J&J subsidiary LTL Management, but both cases were determined to have been filed in bad faith and dismissed.
“This is not the first occasion on which J&J has sought to misuse the bankruptcy system in this manner,” the U.S. Trustee stated in its objection. “The result of this case should be no different.”
Johnson & Johnson is counting on a new venue and judge as a potential difference-maker from its previous tries. The company notched a big win in October when Judge Christopher Lopez decided to keep Red River Talc’s bankruptcy case in Texas court instead of sending it back to the court where LTL Management’s bankruptcies had failed.
J&J Still Faces Opposition from Government Departments, Settlement Holdouts
In addition to concerns over the Texas Two-Step strategy, Johnson & Johnson faces a slew of opposition to its settlement plan from several groups fighting against its completion.
The Department of Health and Human Services (HHS) and Department of Veterans Affairs (VA) became some of the latest groups to enter the fray in late January when they filed an objection to the bankruptcy plan over reimbursement concerns brought on by the settlement.
HHS and the VA provide government-funded programs like Medicare, Medicaid and veteran health benefits. The departments argued that the bankruptcy could disrupt their right to reimbursement for medical expenses for patients who may have been impacted by J&J’s talcum powder.
Reuters reported that HHS may seek up to $1.1 billion from J&J in reimbursements.
Plaintiffs with active lawsuits who have held out from agreeing to the settlement are also fighting against its completion. The Coalition of Counsel for Justice for Talc Claimants, which represents the holdouts, has claimed that J&J’s stated 83% approval rate of the settlement among claimants is inaccurate.
During the trial, the coalition plans to demonstrate why the settlement does not meet the 75% approval threshold required by the U.S. Bankruptcy Code due to “voting irregularities.”
Talc Settlement Will Resolve Tens of Thousands of Lawsuits if Approved
If the hearing ends in a win for J&J and Red River Talc, tens of thousands of lawsuits will be resolved to conclude a massive, years-long litigation.
As of this month, more than 58,000 lawsuits were pending in multidistrict litigation claiming that J&J’s baby powder is tied to the development of ovarian cancer.
J&J has said that the settlement is worth approximately $8 billion after it tacked on an additional $1.75 billion in September to increase plaintiff support.
“The Plan constitutes one of the largest settlements ever reached in a mass tort bankruptcy case,” the company said in a release.
While the settlement would bring an end to ovarian cancer lawsuits, cases claiming that J&J’s talc powder contained asbestos or caused mesothelioma are unaffected and will continue to move through the legal process.