Johnson & Johnson’s latest bankruptcy-focused effort to resolve widespread talc-related litigation hinges on settling ovarian cancer claims. However, the strategy faces long odds and is doomed to fail without higher settlement offers, according to sources familiar with the matter.
J&J remains committed to using bankruptcy to address its mass tort asbestos liabilities stemming from allegedly tainted baby powder, despite seeing two prior Chapter 11 filings for its talc unit tossed out of court last year in the span of just six months. Bankruptcy protection allows the company to avoid incurring legal defense costs while negotiating a potential deal that curtails decades of future talc litigation.
The health-care giant is making strides to tailor its would-be third attempt with a critical mass of support from lawyers representing ovarian cancer claimants, and by taking care of other types of claims, including mesothelioma claims, outside the bankruptcy process. And it tentatively agreed earlier this month to pay about $700 million to end an investigation by more than 40 US states into the company’s marketing of talc products without health warnings, Bloomberg News reported.
By settling mesothelioma cases and consumer protection claims outside of Chapter 11, the company is trying to piece together a bankruptcy plan that focuses on addressing ovarian cancer claims, which constitute the bulk of its asbestos-related legal liabilities.
But the money J&J has offered to settle more than 50,000 ovarian cancer claims isn’t enough to secure a required threshold of support for a new bankruptcy plan, according to people involved in the talks who requested anonymity to discuss private negotiations. Under bankruptcy rules, the formation of an asbestos bankruptcy trust requires approval from at least 75% of present claimants.
The company is now offering to pay about $6.9 billion to resolve all non-mesothelioma cancer claims, according to multiple sources. That dollar figure tracks with the amount the company proposed to pay ovarian cancer claimants earlier this year as part of a broader, $8.9 billion bankruptcy settlement. J&J’s refusal to increase its settlement offer with the group of claimants it’s soliciting to support a third Chapter 11 attempt is a major obstacle, the people said.
But some attorneys believe J&J will eventually throw enough on the table to advance a restructuring deal with a level of support above what the company reached in April 2023 when it put its specially-created talc liability unit, LTL Management LLC, into bankruptcy for the second time.
“I think we’re making constructive progress,” said plaintiffs’ attorney Mikal Watts of Watts Guerra LLP, a key negotiator of the prior $8.9 billion deal. “What I know is that they’re just working hard to solve a very complex problem.”
J&J has maintained that its talc products are safe and don’t cause cancer.
Steps to a Deal
It’s not clear how much settlement money plaintiffs attorneys will demand to garner a required threshold of support, but sources said the company will have to increase the offer by billions.
A lawyer who previously represented J&J against talc litigation proposed a deal in November that would see J&J pay $19 billion to eliminate all its talc liabilities. The offer was met with a chilly reception from J&J, which accused him of wrongfully disclosing privileged information.
In addition to gaining enough creditor support, a third shot at bankruptcy must also overcome the legal infirmities that doomed the two previous filings. The US Court of Appeals for the Third Circuit found in January… (the remainder of the text can be viewed at the original source page)