Johnson & Johnson (J&J) continues its long battle to resolve its asbestos liabilities in bankruptcy court. In January 2024, the global corporation came to a tentative agreement to resolve some of the claims related to asbestos-contaminated talcum powder.
This agreement came after a judge denied J&J’s bankruptcy request for a second time in mid-2023. The bankruptcy denial left the company without relief from thousands of lawsuits over asbestos exposure. The proposed settlement seems to be part of J&J’s strategy for a third bankruptcy filing.
The company plans to address claims for mesothelioma and other cancers separately.
The Story So Far: Johnson & Johnson’s Bankruptcy Attempts After Asbestos Lawsuits
The primary ingredient in baby powder is talc. It is a natural mineral that is often mined near asbestos. Because of this proximity, talc can be contaminated with asbestos during the mining process. Scientific evidence of this contamination has been available since 1976, and reports indicate J&J knew about asbestos in their products since 1971. However, the company has continued to deny the presence of asbestos in its products.
Over the years, thousands of people have filed lawsuits against the company. They allege that asbestos exposure from J&J’s contaminated talc products caused them to develop mesothelioma, ovarian cancer and other cancers. The billion-dollar company has now tried twice to file bankruptcy to settle the lawsuits: in 2021 and 2023.
J&J’s First Attempt at Filing for Bankruptcy
In 2021, Johnson & Johnson attempted to file for bankruptcy using a controversial legal maneuver called “the Texas Two-Step.” The steps are:
- Step 1: Create an underfunded subsidiary company and offload asbestos liabilities into it.
- Step 2: Have the subsidiary file for bankruptcy, citing a lack of funds to cover liabilities.
Several legal scholars expressed concern over this maneuver. They said it would allow companies to set the terms of how much compensation was awarded to victims. In January 2023, an appeals court judge dismissed J&J’s case.
J&J Attempts Filing for Bankruptcy Again
Only a few months later, J&J attempted to file for bankruptcy again. This time, the company proposed creating an $8.9 billion trust fund for victims of its talc products. The U.S. Department of Justice (DOJ) stepped in and called for the courts to dismiss the case, as did asbestos attorneys representing victims of exposure. The second filing was dismissed in July 2023.
Third Time’s a Charm?
Johnson & Johnson’s latest efforts to resolve its legal struggles involve a tentative agreement to pay about $700 million. The company offered the funds in the hope of ending an investigation filed by 43 State Attorneys General. This investigation centered on allegations that J&J had failed to warn consumers about the potential dangers of its contaminated talc. The money is intended to address a bulk of the claims from patients with ovarian cancer. Johnson & Johnson plans to address other claims separately, including those from mesothelioma patients.
However, some participants from the agreement talks said the dollar amount offered wouldn’t be enough money to settle more than 50,000 ovarian cancer claims. As Bloomberg Law reports, “[It] isn’t enough to secure a required threshold of support for a new bankruptcy plan … Under bankruptcy rules, the formation of an asbestos bankruptcy trust requires approval from at least 75% of present claimants.”
Bloomberg also reports that J&J is now offering to pay $6.9 billion toward resolving all non-mesothelioma cancer claims. It’s unclear how much more money would be needed to settle with the majority of ovarian cancer claimants. J&J would need the claimants’ approval to move forward with its plan for a third bankruptcy filing and creating an asbestos trust fund.
