STORY: Johnson & Johnson is facing a critical test over its $10 billion proposal to end litigation over allegations that its baby powder and other talc products were contaminated with asbestos and caused cancer.
J&J is attempting to use a subsidiary’s bankruptcy to resolve lawsuits from more than 62,000 plaintiffs.
Reuters Business Litigation Reporter Dietrich Knauth explains.
“It’s really a pivotal battle over whether or not bankruptcy can or should be used for this type of settlement. Johnson & Johnson is not bankrupt by any traditional measure. It has plenty of money to pay its debts. It just prefers to settle these lawsuits in bankruptcy because it can cut off future lawsuits and it can use the settlement terms to bind people who would prefer to sue it in the court systems.”
This will be the third time J&J has tried to resolve the litigation by using the subsidiary’s bankruptcy.
Courts rejected the two previous attempts. But, this time, the case is in a different bankruptcy court in Houston, Texas.
Opponents of the J&J proposal argue the settlement should not bind those who do not like the terms and would prefer to take their chances in court.
But J&J argues that bankruptcy offers a faster and fairer way to put money into the hands of cancer victims.
“They’ve said that it would take literally thousands of years to tee up one trial at a time. There have been over 60,000 lawsuits filed against Johnson & Johnson, and that number would only increase in the future. It’s increased by 20,000 just over the last four years since they started pursuing a bankruptcy in the first place.”
On Tuesday, an attorney for the bankrupt subsidiary – Red River Talc – suggested the third effort could succeed, saying a vote showed a broad support for its settlement proposal.
Opponents of the proposal say the vote was rigged to ensure J&J’s preferred outcome.
The bankruptcy judge will decide the fate of the company’s latest effort after what is expected to be a weeks-long court hearing.
