(Bloomberg) — Johnson & Johnson said it agreed to pay $8.9 billion to resolve all cancer lawsuits tied to its talc-based powders and will make a fresh attempt to contain the liability within a bankruptcy filing by one of its units.
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The world’s largest maker of health-care products hopes to settle complaints from about 60,000 claimants and fund a trust set up in US bankruptcy court in Trenton, New Jersey, to cover future claims, the company said Tuesday in a securities filing. J&J has already withdrawn its talc-based baby powder and others, including Shower to Shower, from the market.
J&J’s LTL Management unit filed a new Chapter 11 case to provide a basis for the trust, which outlines terms for settling the decade-long litigation. An earlier filing, which didn’t include a settlement, was rejected in January after an appeals court found J&J erred in using bankruptcy to block juries from hearing lawsuits and handing out damage awards. J&J wants a reorganization plan for LTL that caps all the talc liability.
“Resolving this matter through the proposed reorganization plan is both more equitable and more efficient, allows claimants to be compensated in a timely manner,” Erik Haas, J&J’s world-wide head of litigation, said in a release.
Shares of J&J rose as much as 3% in trading after US markets closed.
If enough victims agree to join the settlement, it would free J&J from defending against claims baby powder and others products tainted by asbestos caused different types of cancer. Juries ruled against the company in nearly a dozen such suits over the years — including one appealed all the way to the US Supreme Court — before J&J was forced to pay $2.5 billion to a group of 20 women whose case went to trial in 2018.
Traces of Asbestos
Women and men blamed J&J’s 129-year-old baby powder for causing ovarian cancer and mesothelioma, a cancer specifically tied to asbestos exposure. Victims allege internal J&J documents dating back to the early 1970s show workers warning managers about traces of asbestos found in talc bottled for baby powder. The victims contend J&J executives should have warned consumers about the powders’ health risks.
“This is the largest products liability settlement ever realized after a bankruptcy filing,” said Mikal Watts, one of the plaintiff lawyers who negotiated the deal with J&J. “Our job is to get our clients restitution for their injuries, and this settlement is the culmination of over a decade of fighting for justice.”
J&J argues the talc cases pose a financial threat to the company despite its more than $478 billion market capitalization. That’s because juries could repeatedly hit J&J with multi-billion verdicts that threaten its financial health, its lawyers contend. The company also has suffered reputation harm tied to the talc findings.
J&J has been criticized for using the bankruptcy courts to foster a settlement. A Chapter 11 filing allows companies to put suits on hold while a judge evaluates what they may be worth. Getting court approval for such trusts may require 75% of victims to vote in favor of having their claims handled by that entity.
The company negotiated its new deal with lawyers outside the leadership group overseeing talc cases consolidated as a multi-district litigation (MDL) before a federal judge in New Jersey. Attorneys in the MDL said J&J isn’t putting up enough money and ridiculed the company’s repeated attempts to use the bankruptcy process to deny victims trials.
“This second bad-faith bankruptcy is an attempt by J&J to bully cancer victims into accepting a low-ball deal that would leave most of them with staggering unpaid medical bills and lost wages,” Jason Itkin, a lawyer for claimants who oppose the deal, said in an email. “We believe that this second bankruptcy will be dismissed just like the first one.”
In its January ruling, the appeals court said J&J wrongly put its newly created unit, LTL Management, under court protection to deal with the talc litigation and put trials on old. The three-judge panel found since J&J agreed to set up a more than $61 billion backstop plan for its unit, the company wasn’t in “financial distress” and didn’t qualify for Chapter 11 protection.
In the latest case, J&J has replaced the backstop agreement with the $8.9 billion settlement, which means LTL Management’s new case meets the legal requirements, the company said in a court filing Tuesday.
The new bankruptcy filing is LTL Management LLC, 23-12825, U.S. Bankruptcy Court for the District of New Jersey (Trenton).
(Updates with share price, comments from company, plaintiff lawyers.)
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