Despite experiencing disruptions to its plan on two occasions, Johnson & Johnson is attempting once more to implement its “Texas two-step” approach to free itself from several lawsuits alleging that its talc products triggered cancer in users.
The most recent initiative is led by J&J subsidiary Red River Talc, which announced on Friday that it had filed a Chapter 11 bankruptcy lawsuit in South Texas.
As part of the offer, Red River increased its settlement payment by $1.75 billion, bringing the total to $8 billion. It is anticipated that the cash will be distributed to claimants over a 25-year period, provided that the bankruptcy strategy is successfully executed. After accounting for inflation, the total value of the bankruptcy plan will be close to $10 billion.
Johnson & Johnson contends that the proposed plan will conclusively address both existing and prospective claims related to accusations that its cosmetic talc items induced ovarian cancer in patients.
Johnson & Johnson is presently facing over 62,000 injury lawsuits claiming a connection between its talc products, particularly the widely used baby powder, and cancer. The firm maintains that the allegations regarding its talc products lack substance.
Red River initiated its bankruptcy proceedings after securing the backing of 83% of existing claims, a percentage much higher than the 75% approval requirement established by the U.S. Bankruptcy Code for plan confirmation.
J&J’s official announcement of the Red River plan corroborates a report by Reuters from earlier this month indicating that the company was progressing towards securing the necessary backing for its Texas two-step approach.
In accordance with the strategy utilized by various businesses to address class-action litigation, J&J has established subsidiaries to manage its talc-related claims prior to them filing for bankruptcy protection. The strategy aims to consolidate litigants into a unified settlement while safeguarding J&J from a bankruptcy declaration.
“The opposition to this plan has no meaningful alternative proposal for getting their claimants a better recovery on any sort of realistic timeline, and therefore, any opposition should cease,” said Allen Smith of the Smith Law Firm in Mississipi.
This is Johnson & Johnson’s third attempt to evade the numerous talc lawsuits it is currently facing by employing the Texas two-step strategy. This legal strategy was launched in 2021 by the firm through an independent subsidiary called LTL Management. The federal appeals court rejected LTL’s bankruptcy petition on multiple occasions first in January 2023 and again in July of the same year.
Johnson & Johnson deliberately requested that plaintiffs vote on its most recent bankruptcy plan to enhance its prospects for victory in the third try.
J&J asserts that the bankruptcy agreement serves the best interests of cancer claimants, who, according to the company, are not likely to get a positive result at the trial and may never have the opportunity to present their case in court.
