Lawyers for the plaintiffs in a decade-long court battle against Johnson & Johnson over claims that their talcum powder caused cancer said on Tuesday that they had reached a settlement deal with the firm for $8.9 billion.
In a court filing, Johnson & Johnson explained that the $8.9 billion trust will be funded by the bankruptcy of one of its subsidiaries over a period of 25 years. Johnson & Johnson believes that, if the bankruptcy court upholds the arrangement, it will end all lawsuits over the company’s talc-containing products like baby powder.
The settlement may go into effect only if the court approves of a fresh bankruptcy petition by LTL Management, a Johnson & Johnson subsidiary, and the settlement, and if the business is able to convince a majority of the claimants to approve of the arrangement. To protect itself from the talc case, J&J formed LTL in 2021, but this year, a U.S. appeals court decided that the unit’s bankruptcy filing was improper and rejected the challenge brought by the plaintiffs.
If the settlement is accepted, it will put an end to a protracted court battle that has damaged Johnson & Johnson’s reputation. Although it is not the company’s best-selling product, baby powder is nevertheless a household name, and many of the plaintiffs in the lawsuit said that the talc used to make the powder was tainted with asbestos.
Although all plaintiffs would benefit from a settlement if it were approved by the court, some of the attorneys engaged in the lawsuits were against it.
Lawyer Jason Itkin, whose company is representing 10,000 women who allege that Johnson & Johnson’s talc-based powders caused their ovarian cancer, called the deal “bad for victims” and predicted that it will be stopped in court. Mr. Itkin warned that even if the corporation is successful in its lawsuit, it would still need to convince a majority of claimants to approve the settlement.
In LTL’s first bankruptcy petition, $2 billion was earmarked for settlements with creditors. Johnson & Johnson said in the latest filing that it would be allocating an extra $6.9 billion to fund the payments.
The corporation claims the settlement agreement does not constitute an admission of liability. On Tuesday, the company’s global VP of litigation, Erik Haas, released a statement calling the plaintiffs’ allegations “specious and lacking scientific merit” and noting that it would have taken decades and a huge financial investment to address them.
Johnson & Johnson officials have known for decades that its talc products, notably the now-famous baby powder they started marketing 129 years ago, pose a danger of asbestos exposure. After years of resisting scientists and researchers, the firm has been hit with a deluge of lawsuits, investigations, and questions from lawmakers in recent years.
Verdicts and mistrials were reached in a wide range of the instances. Johnson & Johnson claimed victory in most cosmetic talc jury cases but was hit with dramatic losses when it was required to pay billions of dollars to a few of claimants.
The firm has announced that it would stop selling baby powder made with talc in the United States as of the year 2020. This year, the company aims to end worldwide sales of the product and replace it with a cornflour alternative.
Using the bankruptcy system as cover from any legal action, Johnson & Johnson launched LTL as part of a corporate pirouette. Due to its roots in Texas bankruptcy law, this strategy became known as “the Texas Two-Step,” and the plaintiffs successfully fought to have it overturned.
To those who “cannot afford to wait any longer for a resolution,” the settlement proposal announced on Tuesday would “provide expeditious, substantial, and fair compensation,” as stated by the plaintiffs’ attorneys.
In the following weeks, attorneys say, the new bankruptcy approval procedure will go forward. According to court documents filed by LTL on Tuesday, the company claims that “bankruptcy is the only forum” where it can permanently seal the door on the talc lawsuit and that it is “critical” that all pending talc cases be put on hold so that the settlement can go forward.