J&J Files Third Bankruptcy to Resolve Talc Cancer Lawsuits

J&J Files Third Bankruptcy to Resolve Talc Cancer Lawsuits

Introduction

In an effort to settle tens of thousands of ovarian cancer lawsuits linked to its talcum powder products, Johnson & Johnson has once again turned to a controversial bankruptcy strategy.

The company has transferred all liability from these lawsuits to a newly created subsidiary, Red River Talc LLC, which has now filed for Chapter 11 bankruptcy protection. This legal maneuver, often referred to as the Texas Two-Step, will likely delay upcoming trial dates in the litigation.

On September 20, Johnson & Johnson announced in a press release that Red River Talc LLC had filed for bankruptcy. This subsidiary has been assigned legal responsibility for approximately 62,000 lawsuits involving the company's Baby Powder and Shower-to-Shower products. Plaintiffs in these cases, primarily women, allege that they developed ovarian cancer after using the talc-based products for years in their genital area.

This is Johnson & Johnson's third attempt to resolve the talcum powder litigation through bankruptcy. The Texas Two-Step strategy involves creating a subsidiary solely to file for bankruptcy, effectively limiting the financial liability of the parent company. Critics argue this tactic exploits the U.S. bankruptcy system, allowing profitable corporations to cap their liability and avoid full accountability for the harm they have caused.

Johnson & Johnson had previously tried to move these lawsuits into bankruptcy using another subsidiary, LTL Management. However, federal judges dismissed these attempts, ruling that there was no legitimate financial reason for bankruptcy protection, given Johnson & Johnson's strong financial standing.

In May 2024, Johnson & Johnson offered a $6.5 billion settlement fund to resolve the current and future Baby Powder lawsuits. However, the company has since increased the proposed settlement fund to $8 billion, according to the Chapter 11 bankruptcy filing submitted by Red River Talc LLC in the U.S. Bankruptcy Court for the Southern District of Texas on September 19, 2024.

To approve such settlement plans, bankruptcy courts typically require the support of 75% of the claimants. Johnson & Johnson claims that 83% of the plaintiffs have agreed to the proposed settlement, but legal challenges are still expected.

Since 2016, the federal talcum powder cancer lawsuits have been centralized in the U.S. District Court for the District of New Jersey, due to the common legal and factual issues presented by the cases. While numerous state court trials have resulted in substantial verdicts against the company, no federal trial has yet taken place. A bellwether trial, intended to test the strength of the evidence, is scheduled for December 2024. This trial will be closely monitored to determine how juries might react to the evidence and expert testimony in future cases, should a global settlement not be reached.

However, Johnson & Johnson’s repeated use of bankruptcy filings has significantly delayed the legal process. The company has consistently requested that litigation be paused while its bankruptcy plans are under review, a tactic that could result in further postponement of the upcoming trial. Plaintiffs’ attorneys argue that these delays are unfair to their clients, many of whom are seriously ill or have passed away without having had the chance to present their cases in court.

Johnson & Johnson has already resolved 95% of lawsuits related to mesothelioma claims linked to talcum powder exposure. The remaining cases primarily involve gynecological cancers, with a focus on ovarian cancer. Although the company has agreed to remove talc from its Baby Powder products, it continues to deny that its products posed any health risks.

The company's bankruptcy filing aims to limit its financial exposure while resolving the litigation, but it remains to be seen whether the courts will allow this maneuver to proceed. Meanwhile, the thousands of women affected by the company's talc-based products await justice, as Johnson & Johnson's legal strategies continue to prolong the process.