Johnson & Johnson (JNJ) is once again seeking refuge in bankruptcy, this time through its subsidiary Red River Talc, to resolve thousands of lawsuits concerning its talc products. This marks the company’s third attempt at bankruptcy in an effort to equitably settle all present and future talc-related claims. The bankruptcy filing, under Chapter 11, was made in a Texas court, highlighting the ongoing legal battle that JNJ has faced for years.
JNJ has been embroiled in over 62,000 lawsuits alleging that its talc-based products, particularly its baby powders, contain asbestos, leading to the development of ovarian cancer in numerous women. Despite these accusations, JNJ maintains that its talc products are safe and do not cause cancer. Furthermore, the company has permanently discontinued the sale of its talc-based Johnson’s Baby Powder.
This latest bankruptcy filing comes after two previous attempts by JNJ’s subsidiary, LTL Management, which was specifically formed to handle the talc litigation, were rejected by courts in New Jersey. The courts deemed that JNJ wasn’t facing enough financial distress to warrant bankruptcy protection.
This time around, however, JNJ is presenting a more comprehensive plan. LTL Management proposed a new plan in May 2024, promising a total payout of approximately $6.5 billion over 25 years to claimants. This plan has garnered support from around 83% of current claimants, exceeding the 75% threshold required by the U.S. Bankruptcy Code for confirmation. To sweeten the deal further, Red River has increased its settlement commitment to an estimated $8 billion.
JNJ’s efforts to resolve the talc litigation stem from a series of legal setbacks. Over the years, multiple juries have ruled against JNJ in talc lawsuits. One notable case involved a Missouri court ordering JNJ to pay $4.7 billion in damages to 22 women in 2018. Though this verdict was reduced to $2.1 billion by an appeals court, it still affirmed the initial jury verdict. JNJ ultimately paid the award, which, including interest, totaled approximately $2.5 billion.
In April 2023, JNJ offered a settlement of $8.9 billion over 25 years to fully resolve the cosmetic talc litigation. JNJ believes that resolving the claims through the traditional legal system would be a drawn-out and costly process, potentially damaging the company’s reputation and goodwill. The proposed reorganization plan offers a more efficient approach to compensate claimants in a timely manner.
Despite the increased settlement offer and overwhelming claimant support, some attorneys representing claimants remain skeptical. They argue that JNJ is manipulating the bankruptcy process to delay jury trials and underpay claimants. However, the substantial settlement offer and the high percentage of claimant support suggest that this bankruptcy filing might have a better chance of success than its predecessors.
The outcome of this latest bankruptcy filing will be closely watched by investors and legal experts alike. The future of Johnson & Johnson’s talc litigation remains uncertain, but this recent development could mark a significant turning point in the saga.
