Third time not so lucky in J&J's bid to end talc liability
Johnson & Johnson's third attempt to use bankruptcy proceedings to settle lawsuits claiming that its talc-based products harmed consumers has been rejected.
In a Houston, Texas court, Judge Christopher Lopez dismissed J&J's bid to use a subsidiary – Red River Talc LLC – to resolve some 60,000 lawsuits claiming talc products like Johnson Baby Powder had caused ovarian cancer and other gynaecological disorders. The verdict was followed by a 7.6% fall in the group's share price that wiped billions of dollars off its value.
Red River Talc was set up last year to absorb the liability and separate it from the group's core business, whilst providing a settlement agreement – worth around $8 billion – to provide compensation to alleged victims. J&J filed for voluntary bankruptcy of the subsidiary last September, claiming at the time that settlement had the support of around 83% of claimants.
Lopez ruled that voting on the settlement was carried out in an unreasonably short time in order to pass the approval threshold of 75% of claimants required by the US Bankruptcy Code to secure confirmation of the plan.
Two earlier attempts using another subsidiary called LTL Management also failed to make it through the courts on the grounds that J&J was not in sufficient financial stress to qualify for bankruptcy, with critics of the deals claiming it would allow the company to sidestep its legal and financial obligations and would also underpay victims.
The latest rejection looks set to mark the end of J&J's drive to resolve the litigation through the bankruptcy courts, as the company has said it will "return to the tort system" to defend the "meritless claims and deny plaintiffs' counsel of any recovery."
A Bloomberg Law report has suggested that the development could see the number of outstanding claims balloon to more than 90,000, with J&J likely to be on the hook for about $11 billion if it reaches settlement agreements with around 70% of claimants on a case-by-case basis.
J&J – which has consistently denied the controversial allegations that trace levels of asbestos in talc led to cancers – took all its talc-based products off the market as of 2023 and is now using cornstarch instead. The company reported a charge of $5.1 billion related to talc litigation in its 2024 results, down from $7.1 billion in the prior year.
"In view of the learnings from the bankruptcy case, we are more confident than ever in our position in the tort system," said Erik Haas, the company's worldwide vice president of litigation, in a statement.
J&J also said it has won 16 out of 17 claiming ovarian cancer caused by talc products in the last 11 years.
