Johnson & Johnson is trying to block tens of thousands of lawsuits

A subsidiary of health care giant Johnson & Johnson filed for bankruptcy for the third time on Friday in an effort to advance a severance agreement worth about $10 billion. The agreement is designed to end tens of thousands of lawsuits filed against the company, alleging that baby talc and other talc-based products were manufactured in a way that caused serious illnesses, including cancer.

Johnson & Johnson is facing more than 62,000 lawsuits filed by victims who allege that the company’s products, particularly baby talcum powder, contained asbestos and caused ovarian cancer and other diseases. In order to stop the flow of lawsuits, Johnson & Johnson’s subsidiary, Red River Talc, went to the bankruptcy court in Houston and filed for protection under the federal bankruptcy section.

The filing for bankruptcy is being made at the same time as Johnson & Johnson’s attempt to end the lawsuits through a huge compensation settlement that will cover all the plaintiffs and stop the continuation of the legal proceedings. If the settlement is approved, Johnson & Johnson is expected to pay approximately $10 billion to the victims, as part of its efforts to avoid heavy losses in the courts.

Johnson & Johnson has consistently denied the allegations and continues to maintain that its products are safe to use. Eric Haas, vice president of litigation at Johnson & Johnson, said Friday that the settlement was “fair and equitable to all parties,” adding that 83 percent of current plaintiffs in the Talc cases voted in favor of the proposed settlement.

Despite this, the compromise proposal divides the lawyers representing the cancer victims. Opponents of the settlement intend to move quickly to court to dismiss the bankruptcy proceedings or move them to a New Jersey court, where they have twice rejected Johnson & Johnson’s attempts to end the litigation through a process known as the “Texas Two-Step” process. whose purpose is to protect the company from lawsuits while separating its debts into a separate subsidiary.

Andy Birchfield, a lawyer representing opponents of the settlement, accused Johnson & Johnson of trying to use the bankruptcy system to pay less in compensation for cancer victims. “We see this vote as another effort by Johnson & Johnson to mislead the bankruptcy system and reduce the legitimate claims of ovarian cancer victims,” ​​said Birchfield.

On the other hand, other lawyers supported the settlement, including Alan Smith, a lawyer who previously represented 11,000 plaintiffs in partnership with Birchfield’s office. Bankruptcy judges can enforce global settlement agreements, which can halt all existing lawsuits and ensure no new lawsuits are filed. Outside of bankruptcy, any agreement reached with some of the plaintiffs would leave the possibility for future plaintiffs or those who did not participate in the agreement to continue suing the company, leaving Johnson & Johnson exposed to judgments that could reach huge sums.

To improve its chances in the third bankruptcy proceeding, Johnson & Johnson asked the plaintiffs to vote in advance on the proposed settlement, to ensure that it had enough support for the plan to allow it to succeed. The company required more than 75% support for the bankruptcy judge to enforce the settlement on all claimants.

Johnson & Johnson’s third attempt to settle the claims in bankruptcy differs from its predecessors in that it focuses on claims related to ovarian and other gynecologic cancers. The current settlement is based on previous settlements reached by the company with plaintiffs who filed lawsuits after suffering from mesothelioma, a rare type of cancer caused by exposure to asbestos, as well as with attorneys general and attorneys general in various states.

According to the proposal, Johnson & Johnson will pay approximately $10 billion to the talc plaintiffs over 25 years. The current value of the settlement is approximately $8 billion, after the company recently agreed to add an additional $1.1 billion to the settlement fund, and will pay an additional $650 million in fees to lawyers who previously opposed the settlement.

Johnson & Johnson’s bankruptcy strategy still faces significant legal hurdles, including a June U.S. Supreme Court decision on Purdue Pharma’s bankruptcy, as well as court orders rejecting the company’s previous efforts and proposed federal legislation aimed at Prevent financially strong companies, such as Johnson & Johnson, from benefiting from bankruptcy protections.