Judge Shoots Down J&J’s Multibillion-Dollar Talc Settlement Plan
Editors carefully fact-check all Drugwatch.com content for accuracy and quality.
Drugwatch.com has a stringent fact-checking process. It starts with our strict sourcing guidelines.
We only gather information from credible sources. This includes peer-reviewed medical journals, reputable media outlets, government reports, court records and interviews with qualified experts.
Johnson & Johnson’s attempt to resolve tens of thousands of pending talcum powder lawsuits has failed.
In the culmination of a months-long process, a judge on Monday night rejected the plan, which would have paid out approximately $10 billion to ovarian cancer talc claimants over a 25-year period.
The settlement plan relied on the completion of a Texas Two-Step bankruptcy, in which a subsidiary company is formed, takes on the liabilities of the main company, and then files for bankruptcy in its place. J&J formed a subsidiary called Red River Talc for this purpose, and it filed for Chapter 11 in September.
But the plan received pushback from multiple corners virtually from the moment it was announced. Judge Christopher Lopez, who oversaw the bankruptcy, ultimately decided that it could not be approved.
“While the Court’s decision is not an easy one, it is the right one,” Lopez said in his decision. “… The Court hopes something gets done for J&J, Red River, and claimants who also want finality on their cases.”
J&J, which has attempted and now failed to end the litigation with a Texas Two-Step maneuver three separate times, said that it will not appeal that court’s decision and instead refocus its attention on the ongoing litigation.
As of this month, there were 58,208 active talcum powder lawsuits pending in multidistrict litigation over claims that the company’s talc-based baby powder caused ovarian cancer.
Why J&J’s Talcum Powder Settlement Failed
From the start of the process, a key point of contention in the Red River Talc bankruptcy case was how much support existed among plaintiffs who would be impacted by the settlement.
After Red River Talc filed for bankruptcy, J&J said that its multibillion-dollar settlement plan had the support of about 83% of affected claimants. The U.S. Bankruptcy Code requires the support of at least 75% of claimants for a plan to be confirmed.
But opponents of the settlement quickly claimed that J&J’s claim of support was either inaccurate or misleading. Judge Lopez sought to determine whether that level of support was legitimate, and his inability to get a clear answer was a major factor in the plan’s rejection.
In his dismissal, Lopez pointed to some plaintiffs’ law firms voting yes on behalf of tens of thousands of claimants without directly hearing from them about their wishes. Other claimants were given only a short amount of time to decide whether they would support the plan.
“Votes are a quintessential part of plan confirmation. Votes are voices,” Lopez said. “But the Court did not get to hear from tens of thousands of them.”
Other factors also contributed to the rejection of the settlement plan. Lopez referenced opposition to J&J’s method of using a subsidiary’s bankruptcy to achieve a settlement.
What Comes Next for Talc Lawsuits?
After attempting to negotiate a settlement for years with no luck, J&J signaled a change in its strategy going forward in response to this latest rejection.
“Rather than pursue a protracted appeal, the Company will return to the tort system to litigate and defeat these meritless talc claims,” J&J said in a statement.
This means that the company will now turn its attention to the talcum powder multidistrict litigation, where thousands of cases have been consolidated before one judge in New Jersey. Those legal proceedings had been paused for months as the settlement attempt played out, but now they will likely be cleared to resume.
J&J says it has won 16 of the 17 ovarian cancer talc cases that have gone to trial in recent years.