Johnson & Johnson Faces Legal Hurdles as $6.5 Billion Talc Settlement Vote Nears Completion

Johnson & Johnson's proposed $6.5 billion settlement to resolve tens of thousands of talc-related cancer lawsuits has surpassed a critical voting threshold, with over 75% of claimants reportedly in favor. However, legal challenges continue to loom as the company seeks to finalize the agreement.

J&J Reaches Critical Support in $6.5B Talc Settlement Vote, Awaiting Final Tally Amid Legal Scrutiny

Bloomberg reports that Johnson & Johnson has surpassed a critical support threshold for its proposed $6.5-billion settlement of tens of thousands of lawsuits claiming its infant powder and other talc products caused cancer.
According to Bloomberg, J&J established a challenge for its third attempt to resolve the litigation by placing a subsidiary in bankruptcy protection. More than 75% of claimants voted in favor of the proposal.

Bloomberg cited sources familiar with the negotiations, but Reuters has not independently verified the report. According to sources who spoke with Reuters, the votes are still being counted.

J&J spokesperson Clare Boyle stated that the company could not comment because the vote count still needed to be definitive. The company has previously expressed its confidence that its settlement proposal would ultimately garner sufficient support from plaintiffs to be pursued.

J&J is currently facing lawsuits from approximately 61,000 plaintiffs who have claimed that its baby powder and other talc products were contaminated with asbestos, resulting in ovarian and different types of cancer. J&J has denied the allegations and has stated that its products are secure.

The company established the 75% vote percentage as the benchmark for pursuing another bankruptcy proposal, which is anticipated to occur shortly soon, per a provision in U.S. bankruptcy law. The deadline for voting was July 26.

However, the subsidiary must obtain the ballots of 75% of the claimants to request that a bankruptcy judge enforce the agreement on all claimants.

Bankruptcy judges can enforce global settlements that irrevocably halt all related lawsuits and prohibit filing new ones. Without bankruptcy, any settlement that J&J achieves with specific clients would continue to grant holdouts or prospective plaintiffs the right to file a lawsuit, thereby exposing the company to the potential multibillion-dollar verdicts that motivated it to implement a two-step process in the first place.

J&J Faces Legal Battles Over Third Talc Settlement Attempt as Critics Label It a ‘Fake Bankruptcy’

The company has been embroiled in a contentious dispute with attorneys who oppose its third attempt to resolve the litigation through this maneuver.

Andy Birchfield, who represents plaintiffs opposed to the settlement, referred to J&J's voting procedure as a "fake bankruptcy election" that would not be able to support itself in court.

"No matter what tally is announced, I expect it will be challenged and eventually rejected so that juries can decide what to do about J&J's egregious conduct," Birchfield said.

J&J's third bankruptcy settlement attempt is distinct from its previous endeavors in that it exclusively addresses ovarian and other gynecological cancer claims. This approach is based on J&J's prior settlements with state attorneys general and individuals who had sued after developing mesothelioma, a rare form of cancer that is associated with asbestos exposure.

J&J's bankruptcy strategy continues to encounter legal obstacles. The Supreme Court recently ruled in Purdue Pharma's bankruptcy, which restricts the ability of courts to halt lawsuits against individuals and companies such as J&J that are not insolvent without the plaintiffs' consent.

J&J has stated that the Purdue judgment does not affect its settlement proposal, as U.S. bankruptcy law includes explicit legal protections for asbestos defendants who have not filed for bankruptcy. J&J has asserted that it is eligible for those safeguards because the lawsuits typically contend that the talc used in its products was extracted from underground mineral deposits containing asbestos.

According to certain legal professionals, J&J may not be eligible for the specific legal protections designed to encourage settlement payments by insurers with indirect liability for asbestos litigation.

Plaintiffs' attorneys also oppose J&J's strategy, contending that its most recent settlement should fail for the same reasons as its previous two. Even though the subsidiary was not in "financial distress," the courts rejected J&J's initial two talc bankruptcies. Consequently, J&J must confront comparable objections in this bankruptcy attempt.

Congress has proposed legislation restricting companies' ability to protect themselves from litigation by declaring a shell company bankrupt.