A New Chapter in Ongoing Legal Battles

In a strategic effort to address ongoing litigation, a Johnson & Johnson (J&J) subsidiary has filed for bankruptcy for the third time. The filing, made in the U.S. Bankruptcy Court for the Southern District of Texas, seeks to facilitate an $8 billion settlement related to claims that its talc products, including baby powder, caused cancer.

J&J’s Red River Talc unit faces lawsuits from over 62,000 claimants alleging asbestos contamination linked to ovarian and other cancers. Despite these allegations, J&J insists its products are safe and free of harmful substances.

This latest move follows two prior unsuccessful bankruptcy attempts. J&J is now employing the “Texas two-step” strategy, transferring talc liabilities to a newly created subsidiary that will then file for Chapter 11 bankruptcy.

Seeking Broad Support for a Settlement

The “two-step” strategy aims to consolidate all claims into a single settlement process, allowing a bankruptcy judge to enforce a global resolution that halts related lawsuits and prevents new ones. This approach helps J&J limit exposure to potential multibillion-dollar verdicts from future claims.

To strengthen this latest attempt, J&J secured pre-approval from about 83% of current claimants for its bankruptcy plan, surpassing the 75% needed for judicial enforcement, thereby increasing the chances of a favorable outcome.

This effort specifically targets claims related to ovarian and gynecological cancers, differing from previous attempts. J&J has already settled with state attorneys general and individuals affected by mesothelioma, linked to asbestos exposure.

However, J&J faces challenges navigating this complex legal landscape, including disputes with attorneys opposing the settlement strategy, which could complicate the bankruptcy process.

The company’s approach may also be affected by a recent U.S. Supreme Court decision regarding Purdue Pharma’s bankruptcy and ongoing legal rulings that have dismissed prior efforts. Proposed federal legislation could further restrict financially healthy companies like J&J from using bankruptcy protection.

As J&J seeks to advance this settlement, the outcome will be closely monitored by claimants and the broader legal and corporate community, eager to assess the implications of such strategies.