J&J Subsidiary's 2nd Bankruptcy Move for $8.9B Talc Settlement

J&J Unit’s 2nd Big Bankruptcy Move for $8.9B Talc Settlement

Johnson & Johnson (J&J) has agreed to pay a staggering $8.9 billion to settle tens of thousands of lawsuits alleging that talc in its iconic Baby Powder and other products caused cancer, according to a company statement released on April 4, 2023.

This amount is nearly five times the original offer of $2 billion made by J&J.

The settlement comes after a January appeals court ruling that invalidated J&J’s controversial “Texas two-step” bankruptcy maneuver, in which it sought to offload the talc liability onto a subsidiary that immediately filed for Chapter 11.

The J&J subsidiary, LTL Management, filed for bankruptcy protection for the second time on Tuesday with the intent to present a reorganization plan containing the proposed settlement to a judge as soon as May 14, according to a court filing. J&J stated in a separate statement that approximately 60,000 talc claimants had agreed to the proposal.

The appeals court rejection of J&J’s “Texas two-step” tactic has effectively increased the price tag for the company to resolve the talc litigation, after plaintiffs’ lawyers had resisted the company’s tactics and prevailed. J&J’s board, according to Reuters, approved the significantly larger settlement to current and future plaintiffs with various gynecological cancers and mesothelioma, as confirmed by Mikal Watts, one of the plaintiffs’ lawyers who negotiated the agreement.

Despite agreeing to the massive settlement, J&J reiterated on Tuesday that its talc products are safe and do not cause cancer. The company’s lawyers have maintained that talc claims lack scientific merit and accused plaintiffs’ lawyers of continuing to seek large financial sums by advertising for clients.

However, the proposed settlement still faces legal obstacles, as attorneys representing thousands of plaintiffs issued a release late Tuesday opposing the settlement. Jason Itkin, founding partner of the Houston-based personal injury law firm Arnold & Itkin LLP, called the deal a “sham” that does not adequately compensate most victims for their medical bills. Other plaintiffs could also continue to oppose the settlement and appeal the case again to the same court that has already rejected the subsidiary bankruptcy – the 3rd U.S. Circuit Court of Appeals in Philadelphia.

J&J’s “Texas two-step” bankruptcy maneuver, which involved using a Texas state law to divide the company being sued into two and shifting liability to a newly created subsidiary, has been portrayed by plaintiffs’ lawyers as an abuse of the bankruptcy system by a multinational conglomerate with significant financial resources. J&J and its subsidiary have argued that the bankruptcy served a greater good for all parties, including plaintiffs, by delivering settlement payouts more fairly, efficiently, and equitably than through trial courts where awards can vary greatly.

Under the terms of the newly proposed settlement, plaintiffs diagnosed with cancer before April 1 would be paid from a bankruptcy trust within one year of a judge approving the Chapter 11 plan creating it, according to Watts, the plaintiffs’ lawyer who helped negotiate the deal. Plaintiffs diagnosed later will have access to money set aside in the trust for the next 25 years.

The massive settlement comes after the legal failure of J&J’s original “Texas two-step” bankruptcy filed in October 2021. The appeals court denied the J&J subsidiary’s bid to delay the ruling from taking effect while seeking a review from the U.S. Supreme Court, and a U.S. Bankruptcy Judge in New Jersey dismissed the previous LTL bankruptcy, complying with the appeals court ruling that reversed his earlier decision endorsing the maneuver.

Watts expressed confidence that enough plaintiffs have agreed to the settlement to convince a bankruptcy judge to approve it, but it remains to be seen how the legal obstacles and opposition from some creditors will be addressed. Watts stated, “While we understand that not all creditors may be satisfied with the terms of the settlement, we believe it represents a fair and reasonable resolution to the bankruptcy proceedings and allows for the maximum recovery for all parties involved.”

The proposed settlement also includes provisions for transparency and accountability moving forward. It requires the creation of an independent oversight committee to monitor Purdue Pharma’s compliance with the settlement terms, including its continued cooperation with ongoing investigations and litigation against other defendants in the opioid crisis.

In addition, the settlement includes provisions for the public release of millions of pages of documents related to Purdue Pharma’s marketing and sales practices for its opioids. This move is aimed at increasing transparency and shedding light on the company’s actions that have been widely criticized for their role in fueling the opioid epidemic.

While the proposed settlement has been met with some opposition, with some creditors and advocates arguing that it does not go far enough in holding Purdue Pharma and its owners accountable for their actions, Watts expressed confidence that it is the best outcome given the circumstances. He stated, “This is a historic step towards providing resources for people and communities devastated by the opioid crisis. It’s a step towards holding Purdue Pharma and its owners accountable for their role in this crisis.”

Moreover, the proposed settlement is subject to approval by the bankruptcy court, and a hearing on the matter is scheduled for later this year. If approved, it would mark a significant development in the ongoing efforts to address the devastating impact of the opioid crisis in the United States, which has claimed the lives of hundreds of thousands of people and left countless others struggling with addiction and its consequences.

As the legal process unfolds, many will be watching closely to see how the proposed settlement progresses and whether it will ultimately provide the much-needed relief and justice for those affected by the opioid epidemic. The outcome of this landmark case, in overall, will likely have significant implications for future litigation against other entities involved in the opioid crisis and may set a precedent for how similar cases are resolved in the future. Only time will tell how the situation will unfold, but for now, the proposed settlement represents a step towards addressing the complex legal and societal issues surrounding the opioid epidemic in the United States.

The parties involved will continue to work towards a resolution that balances the interests of the creditors, the public, and the victims of the opioid crisis. Meanwhile, efforts to combat opioid addiction and overdose, including increased access to treatment and prevention programs, continue to be a priority for policymakers, public health officials, and advocates alike. The opioid crisis remains a significant public health challenge that requires comprehensive and coordinated efforts to effectively address its multifaceted nature and prevent further harm to individuals, families, and communities.

As the legal and societal response to the opioid epidemic continues to evolve, it is hoped that lessons learned from this crisis will inform future policies and practices aimed at preventing similar tragedies in the future. In the meantime, those affected by the opioid epidemic, including individuals struggling with addiction, their families, and their communities, continue to seek support and resources to cope with the ongoing challenges posed by this devastating public health crisis.

Overall, the proposed settlement with Purdue Pharma represents a significant development in the ongoing efforts to hold those responsible for the opioid crisis accountable and provide relief to those who have been impacted by it. As the legal process continues to unfold, it remains to be seen how this landmark case will ultimately be resolved and what implications it will have for future efforts to address the opioid epidemic in the United States. However, the proposed settlement is a step towards addressing the complex legal and societal issues surrounding the opioid crisis, and many are hopeful that it will provide some measure of justice and relief to those affected by this devastating public health crisis.

The parties involved will continue to work towards a resolution that balances the interests of all stakeholders, including the plaintiffs and the company’s creditors.

One of the main challenges in reaching a settlement is the sheer complexity of the case. With numerous plaintiffs, each with their own unique circumstances and claims, and a bankruptcy process that involves multiple legal jurisdictions and intricate financial considerations, finding a resolution that satisfies everyone involved is no easy task.

The opposition from some of the plaintiffs who may not be satisfied with the proposed settlement is another obstacle. Some may argue that the amount offered is not sufficient to cover their losses or that the terms of the settlement are unfair. Others may feel that the company should be held accountable for its actions to a greater extent, and may resist any attempts to reach a settlement that they perceive as letting the company off the hook too easily.

Despite these challenges, Watts remains optimistic that a resolution can be reached. He emphasizes that the proposed settlement is a significant step towards compensating the victims and moving towards closure in the long-standing legal battle. He also points out that the settlement would provide a faster and more efficient way of compensating the plaintiffs compared to protracted litigation, which could take years to resolve.

The bankruptcy judge will ultimately have the authority to approve or reject the proposed settlement. In making their decision, the judge will consider various factors, including the financial resources of the company, the merits of the claims, and the interests of all parties involved. If approved, the settlement would likely establish a fund to compensate the plaintiffs, which would be administered by a third-party trustee.

In the meantime, the parties involved will continue to work towards a resolution that balances the interests of all stakeholders. This may involve further negotiations, mediation, or other forms of dispute resolution. The goal is to find a solution that provides fair compensation to the plaintiffs, holds the company accountable for its actions, and allows for the efficient resolution of the bankruptcy case.

Similar Posts