Pharmaceutical giant pursues bankruptcy over cancer accusations

Pharmaceutical giant Johnson & Johnson is making another attempt to file bankruptcy to settle claims that its talc products are causing cancer.

Over 38,000 personal injury lawsuits have been filed against J&J over the last few years alleging that the company’s baby powder and other talc products contain asbestos and are causing ovarian cancer, mesothelioma, and other cancers. The 365-billion-dollar company denies the allegations and says its baby powder is safe.

One of the lawsuits, in which a California man claimed he contracted cancer from exposure to J&J’s baby powder, won an $18 million judgment against J&J, reported Reuters.

In response to the lawsuits, the company tried to file bankruptcy in 2021. A Chapter 11 filing would allow it to settle all talc-related personal injury cases for $8.9 billion. That settlement would not only shut down current claims against the company — even those whose plaintiffs do not want to settle — but it would prevent similar future lawsuits as well.

J&J’s bankruptcy strategy involved offloading its talc liabilities into a spin-off company called LTL Management and filing Chapter 11 for that entity, a strategy referred to as the “Texas Two-Step.”

But still, a judge ruled that LTL was not in sufficient financial distress to go bankrupt. When LTL tried again in July this year, it received a similar response from the court.

"In sum, this Court smells smoke, but does not see the fire," US Bankruptcy Judge Michael Kaplan wrote in his order. "Therefore, the emphasis on certainty and immediacy of financial distress closes the door of chapter 11 to LTL at this juncture."

J&J has now appealed the ruling, which it expects will be denied — at which point the company plans to appeal to the US Supreme Court.

"We are pursuing the appeal through to the Supreme Court to the United States of the July ruling by the New Jersey Bankruptcy Court that dismissed LTL's bankruptcy case. Notably, our appeal recently was joined by council representing the vast majority of the talc claimants," said J&J Worldwide Vice President of Litigation Erik Haas.

J&J is also claiming that most plaintiffs want the $8.9 billion settlement, though some plaintiffs’ attorneys have said this is only an “illusion.” The company is signing deals with plaintiffs’ lawyers, they said, who are then signing up large numbers of clients without filing lawsuits.

"J&J has spent two years trying to convince us that somehow a company worth a half-trillion dollars is bankrupt," commented attorney Andy Birchfield. “It's time for the nonsense to stop and for J&J to accept responsibility.”