(Bloomberg) — Johnson & Johnson said it received overwhelming support for a roughly $8 billion settlement. This is for claims that its talc-based baby powder caused cancer. It’s a key step as the company makes its third attempt to resolve thousands of lawsuits in bankruptcy court.
The company’s subsidiary, Red River Talc LLC, filed for Chapter 11 bankruptcy in Texas. This happened after 83% of claimants accepted J&J’s settlement offer. Those votes are still subject to challenge in the bankruptcy case by victims who object to the deal.
J&J called the vote before putting the unit in bankruptcy. They hoped to speed up its Chapter 11 case and overcome flaws in two earlier attempts. The company recently sweetened its settlement offer to more than $8.2 billion, Bloomberg first reported Thursday.
Over the past 15 years, juries have awarded billions of dollars in damages. This is to people who blame fatal cancers like ovarian and mesothelioma on J&J’s powder. Some of those verdicts were later overturned on appeal. The company has struggled to reach a so-called global out-of-court settlement with some victims and put an end to the suits.
J&J has said its talc-based powders never caused cancer. It appropriately marketed its now-withdrawn talc-based baby powder for more than 100 years. Last year, the company discontinued the talc-based version of the product and replaced it with a cornstarch-based substitute across the globe.
“This plan is fair and equitable to all parties,” Erik Haas, worldwide vice president of litigation for Johnson & Johnson, said in statement. The unit’s reorganization effort “should be expeditiously confirmed by the bankruptcy court.”
The company’s stock was largely unchanged Friday afternoon.
The baby powder litigation has thrown a shadow on J&J’s shares. Efforts to get appellate judges to sign off on two previous attempts to settle the claims in bankruptcy court failed.
An appeals court concluded J&J’s unit couldn’t show it faced a realistic threat of financial distress from the baby powder cases. In Friday’s so-called pre-packaged Chapter 11 filing, the unit’s lawyers are stressing a groundswell of support for the current offer.
J&J has been preparing for the unit’s third bankruptcy attempt for months. They moved another unit to Texas, where state law allows companies to assign liability from mass tort cases to subsidiaries that then file for bankruptcy. The maneuver, dubbed the Texas Two Step, allows companies to force settlements onto mass-tort victims.
“Absent a Chapter 11 resolution, the talc litigation would continue for decades, at great expense to the Debtor but with no benefit to claimants,” the J&J unit’s lawyers said in court papers. Under its latest plan, baby powder victims would receive average payouts ranging from $75,000 to $175,000 depending on the severity of their injuries.
Plaintiff Lawyers
“Women across America will finally achieve a just settlement of their claims, having voted overwhelmingly in favor of this Plan,” said Mikal Watts, leader of a plaintiffs lawyers’ group backing J&J’s offer.
Opponents of the deal aren’t as optimistic about its value. “This proposed compensation is a gross undervaluation,” said Andy Birchfield, an Alabama-based plaintiffs’ lawyer who is leading opponents to J&J’s proposed settlement and Red River’s Chapter 11 filing. “Ovarian cancer claims involve measurable costs that are far greater than what is being offered.”
Most of the more than 62,000 baby powder cancer suits filed so far have been gathered before a federal judge in New Jersey for pre-trial information exchanges. Those cases are likely to be put on hold while Red River’s bankruptcy case plays out.
The bankruptcy case was assigned to Judge Christopher Lopez, who joined the federal bench in Houston in 2019.
The bankruptcy case is Red River Talc LLC, 24-90505. It is in the US Bankruptcy Court for the Southern District of Texas (Houston).