A Johnson & Johnson subsidiary filed for bankruptcy for a third time on Friday as the healthcare giant seeks to advance an approximately $8 billion proposed settlement that would end tens of thousands of lawsuits alleging that the company’s baby powder and other talc products caused cancer.
J&J’s Red River Talc unit made its filing in the U.S. Bankruptcy Court for the Southern District of Texas. J&J faces lawsuits from more than 62,000 claimants who alleged that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers.
J&J denies the allegations and has said that its products are safe.
After being?rebuffed twice?by federal courts, New Brunswick New Jersey-based J&J is?attempting again?to end the litigation in a so-called “Texas two-step” bankruptcy.
J&J said the Red River unit filed the bankruptcy case after it received support of about 83% of current claimants for the proposed bankruptcy plan.
The “two-step” maneuver involves offloading its talc liability onto a newly created subsidiary that then declares Chapter 11, a type of bankruptcy that involves a reorganization of assets and debts under court supervision. The goal is to use the proceeding to force all plaintiffs into one settlement, without requiring J&J itself to file for bankruptcy.
Bankruptcy judges can enforce global settlements that permanently halt all related lawsuits and forbid new ones.
Outside of bankruptcy, any settlement J&J reached with some claimants would still leave holdouts or future plaintiffs with the right to sue - and leave the company exposed to potential multibillion-dollar verdicts that encouraged it to use a two-step in the first place.
To improve its chances in a third bankruptcy effort, J&J asked plaintiffs to vote on its proposed deal ahead of time to ensure that it has enough support for its plan to succeed. J&J said it has more than the 75% of votes needed for a bankruptcy judge to impose the deal on all plaintiffs.
J&J’s third attempt at a bankruptcy settlement also differs from its previous efforts in part because it focuses only on ovarian and other gynecological cancer claims, building on J&J’s previous settlements with?state attorneys general?and people who had sued after developing mesothelioma, a rare form of cancer linked to asbestos exposure.
The company has been engaged in a?bitter fight?with?lawyers opposing?its third attempt to settle the litigation through this maneuver.
Its?bankruptcy strategy?still faces legal?hurdles. These include a June U.S. Supreme Court?decision?involving Purdue Pharma’s bankruptcy, court orders?dismissing?its previous efforts and?proposed federal legislation?aimed at preventing financially healthy companies like J&J from benefiting from bankruptcy protection.
Reporting by Dietrich Knauth and Bhanvi Satija in Bengaluru; Editing by Leigh Jones, Will Dunham, Sandra Maler and Shounak Dasgupta
