Written by Dietrich Knaut
NEW YORK (Reuters) – Johnson & Johnson has agreed to a $6.5 billion settlement of tens of thousands of lawsuits alleging that its baby powder and other talc products caused cancer, Bloomberg reports. Cleared important criteria for support amount.
According to Bloomberg, more than 75% of plaintiffs voted in favor of the proposal, a hurdle J&J has set for its third attempt to place a subsidiary into bankruptcy protection to resolve the lawsuit.
Reuters has not independently verified the report, but Bloomberg reported it, citing a source familiar with the negotiations. Officials who spoke to Reuters said votes were still being counted.
J&J spokeswoman Claire Boyle said the company could not comment because the vote tally is not final. The company had previously expressed confidence that the proposed settlement would ultimately receive enough support from plaintiffs to proceed.
J&J is facing a lawsuit from about 61,000 claimants alleging that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers. J&J has denied the allegations and said its products are safe.
The company has set a 75% vote share, consistent with U.S. bankruptcy law, as the threshold for moving forward with another bankruptcy bid, expected in the near future. The deadline for voting was July 26th.
After being twice rejected by federal courts, the health care giant is once again trying to end the case in a so-called “Texas two-tier” bankruptcy.
This “two-step” maneuver involves transferring talc debt to a newly formed subsidiary, which then declares Chapter 11. The goal is to use the legal process to force all plaintiffs into a single settlement without requiring J&J to file for bankruptcy itself.
But the subsidiary would need a 75% vote of claimants to ask the bankruptcy judge to impose the deal on all claimants.
Bankruptcy judges can enforce a global settlement that permanently halts all related litigation and prohibits new litigation. Barring bankruptcy, even if J&J were to reach a settlement with some customers, it would still be open to foreclosure and future plaintiffs to sue, leaving the company with billions of dollars to encourage two-tier litigation in the first place. could be exposed to a judgment of magnitude.
The company is locked in a bitter battle with lawyers who oppose its third attempt to settle the case with this maneuver.
Andy Burchfield, an attorney representing plaintiffs opposed to the settlement, called J&J’s voting process a “sham bankruptcy election” that would not stand up in court.
story continues
“No matter how the tally is announced, it will likely be challenged and ultimately dismissed so that jurors can decide what to do about J&J’s egregious conduct,” Burchfield said. I’m anticipating that.”
J&J’s third bankruptcy settlement attempt differs in part from previous efforts by focusing solely on ovarian cancer and other gynecological cancer claims, with state attorneys general and cancer-related It builds on J&J’s previous settlement with people who developed the rare form of mesothelioma and filed lawsuits. to asbestos exposure.
J&J’s bankruptcy strategy still faces legal hurdles. The Supreme Court recently issued a ruling in the Purdue Pharma bankruptcy case that narrows the power of courts to stay lawsuits against non-bankrupt individuals and companies like J&J without the consent of the people who filed the lawsuits.
J&J said the Purdue ruling would not affect its proposed settlement because U.S. bankruptcy law includes clear legal protections for asbestos defendants who have not filed for bankruptcy. J&J says it qualifies for these protections because the lawsuits generally allege that the talc used in its products is mined from underground deposits that also contain asbestos.
Some legal experts say J&J may not be eligible for certain legal protections written to encourage settlement payments by insurers indirectly liable in asbestos lawsuits.
J&J’s strategy also faces opposition from plaintiffs’ lawyers who say the new settlement should fail for the same reasons as the first two. Courts rejected J&J’s first two talc bankruptcies because the subsidiary was not in “financial distress,” and J&J will have to overcome similar arguments in its latest bankruptcy attempt. .
Congress is proposing legislation that would limit companies’ ability to protect themselves from lawsuits by forcing shell companies into bankruptcy.
(Reporting by Dietrich Knauth and Mike Spector; Editing by Will Dunham, Lee Jones and Rod Nickell)
