Johnson & Johnson has reached a significant milestone in securing support for its proposed $6.5-billion settlement to address numerous lawsuits claiming its talc products, including baby powder, caused cancer. Over 75% of claimants have endorsed the proposal, marking a pivotal step for J&J in attempting to resolve the litigation through bankruptcy protection. The company has faced extensive legal battles over the safety of its talc products, which it maintains are safe.
In earlier instances, J&J faced setbacks as federal courts rejected its efforts to resolve the talc litigation through bankruptcy maneuvers. The company’s current strategy involves focusing solely on ovarian and other gynecological cancer claims, diverging from previous encompassing settlements. Historically, J&J’s prior attempts also included state attorney general settlements and claims related to mesothelioma. Despite these changes, J&J still encounters skepticism regarding its bankruptcy eligibility.
Voting and Legal Challenges
More than 75% of claimants have approved the settlement, meeting the threshold J&J established for considering a third bankruptcy filing. This vote is crucial for the pharmaceutical giant as it aims to package its talc liabilities into a newly created subsidiary, which would then declare Chapter 11 bankruptcy. J&J spokesperson Clare Boyle emphasized that the final vote tally is pending, and the company is confident in obtaining sufficient support.
“No matter what tally is announced, I expect it will be challenged and eventually rejected so that juries can decide what to do about J&J’s egregious conduct,” said Andy Birchfield, a plaintiffs’ attorney opposing the settlement.
Texas Two-Step Strategy
J&J’s “Texas two-step” strategy has been a contentious issue, involving the transfer of talc liabilities to a subsidiary that then declares bankruptcy. This maneuver aims to consolidate all claims into a single settlement without requiring J&J itself to file for bankruptcy. Legal experts and plaintiffs’ attorneys have criticized this approach, arguing it is a tactic to shield the company from significant financial liability. Recent Supreme Court rulings and proposed legislation may further complicate J&J’s strategy.
The Supreme Court’s ruling in Purdue Pharma’s case, which limits courts’ ability to halt lawsuits against non-bankrupt entities, poses a potential hurdle for J&J. However, J&J contends that specific legal protections for asbestos defendants in U.S. bankruptcy law support their settlement proposal. The company asserts that these protections apply due to the nature of the talc lawsuits, which allege asbestos contamination.
The ongoing legal challenges highlight the complex nature of J&J’s bankruptcy strategy. The company must navigate opposition from plaintiffs’ attorneys and potential legislative changes that could impact the effectiveness of its “Texas two-step” maneuver. Additionally, court rejections of previous bankruptcy attempts due to the subsidiary’s lack of financial distress present further obstacles.
For the reader, understanding these layers of legal and strategic maneuvers provides insight into the broader implications of corporate liability and bankruptcy law. The outcome of J&J’s third attempt to resolve these lawsuits will set significant precedents for how companies manage large-scale litigations and the protections they can seek through bankruptcy. Staying informed on the developments of this case will be crucial for those following corporate legal strategies and consumer safety issues.
