Johnson & Johnson unit seeks third Chapter 11 bankruptcy filing to settle talc claims
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Justin Sullivan
A Johnson & Johnson (NYSE:JNJ) subsidiary, Red River Talc, that has been formed to handle claims related to the healthcare giant’s talc-based products, filed a voluntary prepackaged Chapter 11 bankruptcy case Friday to resolve current and future claims linked to ovarian cancer.
The filing in the U.S. Bankruptcy Court for the Southern District of Texas is offering a settlement of ~$8B to be paid over 25 years, $1.75B more than was previously discussed.
About $1.1B of the additional $1.75B will go to the bankruptcy trust, while $650M will go to resolve claims related to plaintiffs’ legal fees and expenses.
Red River Talc has the support of 83% of current claimants for the settlement plan, a figure J&J noted is more than the 75% threshold required by the U.S. Bankruptcy Code.
The bankruptcy attempt is the third from J&J. The prior two were blocked, both in a New Jersey bankruptcy court, using a different subsidiary, LTL Management. The last one, thwarted in July 2023, would have provided an ~$8.9B settlement, and to fewer plaintiffs than now. The judge in the case issued the denial saying that J&J was not in financial distress.
If approved this time around, the bankruptcy would resolve 99.75% of all pending talc lawsuits against J&J in the U.S. The other 0.25% are mesothelioma-related, and the company said 95% of those have already been resolved.
J&J’s bankruptcy attempts related to the talc claims have come under fire as they are alleged to use the Texas two-step strategy. Under the plan, a company spins off liabilities into a new unit, which then declares bankruptcy. In this way, the parent company shields more of their assets from litigants.
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