Update: (06/04/2024): This blog article was updated with the news of cancer victims filing a class action lawsuit Johnson & Johnson for fraud related to the company’s multiple bankruptcy attempts.
Johnson & Johnson is making a third attempt to settle cancer lawsuits stemming from its former talc-based Baby Powder contaminated with asbestos. The company is proposing a $6.48 billion settlement to resolve tens of thousands of cases from people who developed cancer after using the once-popular product.
However, the settlement excludes mesothelioma lawsuits, a significant difference in this proposal compared to the previous two. In two prior attempts.
The company’s settlement proposal focuses on ovarian cancer lawsuits. According to numerous reports, more than 95% of the estimated 60,000 pending lawsuits relate to ovarian cancer. Most of the claimants are women, who either used Johnson & Johnson Baby Powder on their children or themselves.
Johnson & Johnson officials said the plan is to address pending mesothelioma lawsuits separately. Johnson & Johnson’s previous two bankruptcy settlement proposals were rejected by courts, which has kept the company subject to facing lawsuits from victims.
Why Johnson & Johnson Faces Cancer Lawsuits
Johnson & Johnson Baby Powder was a popular health product for decades. The main ingredient, talc, absorbs moisture and maintains skin health.The mineral can be ground into a powder for use in Johnson & Johnson Baby Powder and other health and beauty products.
Talc is a naturally occurring mineral that is found near another mineral: asbestos.
Asbestos can cause cancers such as lung cancer, ovarian cancer, and a rare cancer called mesothelioma, which mostly develops in the lining of the lungs or abdominal cavity. If talc and asbestos are mixed, then sharp asbestos fibers can hide in the ingredient.
This contamination can lead to asbestos exposure for consumers of the products. Sharp asbestos fibers inhaled or swallowed can irritate cell linings and cause one of the aforementioned types of cancer.
As the public learned of the danger associated with using Johnson & Johnson Baby Powder, former consumers developed cancer and filed lawsuits. The company eventually stopped manufacturing and selling the product in North American markets, and then worldwide, due to the legal ramifications of the product’s ties to cancer.
Johnson & Johnson’s ‘Texas Two-Step’ Attempts
According to reports, Johnson & Johnson faces more than 40,000 pending cancer lawsuits. Most of them involve cases of ovarian cancer. This type of cancer is much more common than mesothelioma: ovarian cancer is diagnosed in approximately 20,000 people in the United States each year; mesothelioma is diagnosed in nearly 3,000 people in the U.S. each year.
Mesothelioma lawsuits against Johnson & Johnson can lead to enormous verdicts for victims. Juries have levied verdicts of $325 million, $45 million, $29.4 million and $26.5 million – just a few of many – against the pharmaceutical giant. The company also lost an ovarian cancer lawsuit trial involving 22 women, who were awarded a verdict of $4.7 billion (the verdict was later lowered to $2 billion).
Johnson & Johnson’s solution is a legal tactic called the “Texas Two-Step.” The strategy is to create a subsidiary company to shoulder the legal liabilities associated with the company’s Baby Powder product. The subsidiary is a shell company, made solely to become the target of pending and future lawsuits and then file for bankruptcy.
The first part of the bankruptcy is to settle the pending lawsuits. The second part is ensuring that future claimants receive compensation. Both parts benefit Johnson & Johnson, which avoids higher payouts to victims from trial verdicts or case-by-case settlements.
How Asbestos Trust Funds Work
Companies that are bankrupt cannot be sued, so any future cancer victims wishing to take legal action would receive compensation through an asbestos trust fund filing. Asbestos trust funds are bank accounts set up specifically for bankrupt companies to compensate people with asbestos diseases affected by the company’s former behavior.
Asbestos companies began the Texas Two-Step approach in the 1980s to avoid facing lawsuits, which often lead to higher payouts than from asbestos trust funds. Lawsuits can end in a jury verdict or a settlement agreement.
Johnson & Johnson’s Prior Settlement Proposals
Johnson & Johnson has attempted the Texas Two-Step twice already, creating a subsidiary called LTL Management. The first bankruptcy attempt in 2021 was a settlement proposal of $2 billion. The second bankruptcy attempt in 2023 was a settlement proposal of $8.9 billion. In both instances, Johnson & Johnson was attempting to settle all cancer lawsuits, including ones involving people affected by mesothelioma.
Courts blocked each attempt, calling the amount inadequate to compensate pending and future victims of cancer. These two rulings sent Johnson & Johnson back to the drawing board.
The third settlement proposal, for $6.475 billion, brings the Texas Two-Step tactic back into the public light. One of the main differences in this new settlement proposal is it’s only for ovarian cancer lawsuits, as the company reportedly plans to settle mesothelioma cases separately. According to reports, Johnson & Johnson has already settled or gone to trial in approximately 95% of the mesothelioma lawsuits filed against the company.
Another difference is Johnson & Johnson has renamed the subsidiary LLT Management and moved it to Texas, where it plans to file for bankruptcy. The strategy is called “Texas Two-Step” because Texas bankruptcy courts have been more lenient for this tactic. In the previous two settlement proposals, the bankruptcy was filed in New Jersey.
Lastly, claimants in the pending ovarian cancer lawsuits will vote on whether they approve the proposal. The company needs at least 75% support from claimants to move the proposal forward. Claimants were not afforded this opportunity the first two times.
Cancer Victims Sue Johnson & Johnson for Fraud
Cancer victims filed a class action lawsuit in May against Johnson & Johnson alleging fraud for the company’s repeated attempts to use a shell company for bankruptcy. Reuters reported the news.
Five plaintiffs seek to represent the more than 50,000 people with pending cancer lawsuits against Johnson & Johnson. The lawsuit, filed in New jersey federal court, alleges the bankruptcy strategy hopes to shield billions of dollars from deserving plaintiffs, including people with mesothelioma and ovarian cancer.
Sources & Author
- Johnson & Johnson offers to pay $6.5 billion to settle talc ovarian cancer lawsuits. CBSNews. Retrieved from: https://www.cbsnews.com/news/johnson-johnson-baby-powder-ovarian-cancer/. Accessed: 05/05/2024.
- Johnson & Johnson to pay $6.5 billion to resolve nearly all talc ovarian cancer lawsuits in U.S.. CNBC. Retrieved from: https://www.cnbc.com/2024/05/01/johnson-johnson-will-pay-6point5-billion-to-resolve-nearly-all-talc-ovarian-cancer-lawsuits-in-us.html. Accessed: 05/05/2024.
- Johnson & Johnson Proposes $6.5 Billion in New Talc Settlement Offer. New York Times. Retrieved from: https://www.nytimes.com/2024/05/01/business/johnson-johnson-talc-settlement.html. Accessed: 05/05/2024.
- Cancer victims sue J&J over ‘fraudulent’ bankruptcies. Reuters. Retrieved from: https://www.reuters.com/legal/cancer-victims-sue-johnson-johnson-over-fraudulent-bankruptcies-2024-05-22/. Accessed: 06/04/2024.
Sources & Author
