After two rejected efforts by Johnson & Johnson to use a bankruptcy plan to settle tens of thousands of cancer claims against its talc powder, the company can hope for a better outcome a third time after more than 75% of claimants agreed to a $6.5 billion settlement plan, Bloomberg Law reported.
Claimants were given the summer to learn about the plan and vote for or against it in a secret ballot. With more than 75% agreeing to it, the company could have what it needs to file a fast-track consensual prepackaged Chapter 11 bankruptcy plan in federal court — the third time it will try such a filing.
“Unlike the prior cases, it is the vote of the claimants … that decides whether the plan may proceed,” Erik Haas, Johnson & Johnson’s worldwide head of litigation, said in May when the company announced the plan and shared it with claimants.
The previous efforts were hamstrung by what Haas said was an effort by plaintiffs’ counsel to derail agreement because of conflicting financial incentives.
A “small minority of plaintiff lawyers [stood] to receive excessive legal fees outside of a reorganization,” Haas said.
The results of the vote haven’t been publicly announced, Bloomberg reported, but its broad acceptance by claimants is expected to boost the company’s next effort to get a judge to agree to the plan as part of a bankruptcy settlement, according to the company.
J&J in 2021 created an affiliate, called LTL Management, to hold all of its talc liabilities and then file for bankruptcy to get most of them resolved as part of a single package.
The company says it has reason to think this third bankruptcy effort could go through, based on what the judge said when he rejected the effort the last time.
“In its July 2023 decision dismissing LTL’s prior bankruptcy case, the New Jersey Bankruptcy Court stated that the company and LTL had made ‘remarkable progress’ towards ‘a fair, efficient and expeditious settlement’ for all claimants and ‘strongly encouraged’ the pursuit of a comprehensive resolution through another bankruptcy,” the company said in May.
Under this new plan, the company would pay ovarian cancer claimants a present value of $6.475 billion over 25 years, covering 99.75% of these lawsuits pending against it. The remaining pending personal injury lawsuits, relating to mesothelioma, which is a different type of cancer that’s been blamed on the talc, would be addressed outside of the plan, as would all the state consumer protection claims that are pending against it.
By some estimates, the company could face as much as $190 billion in liability for just the ovarian cancer cases if all of the claims were individually given their day in court. However, not all of them would get that far, and many would not be expected to win if they did, given the company’s win-loss record of the cases that have gone to court so far.
The company has insisted throughout the talc isn’t responsible for the cancers, although it nevertheless switched from talc to corn starch a few years ago.
LTL Management is likely to file its latest bankruptcy petition in Texas court, Bloomberg reported Aug. 12. Critics, and the judge that’s overseen the previous bankruptcy filings, have questioned whether the company is acting in good faith by trying to use bankruptcy to settle the cases.
