Johnson & Johnson offers $700 million for settlement
Johnson & Johnson (J&J) has recently reached a tentative settlement in response to an investigation by over 40 states regarding allegations that the company misled consumers about the safety of its talc baby powder and other talc-based products. The $700 million deal that J&J agreed to resolves the states’ concerns, but it leaves unaddressed the tens of thousands of consumer lawsuits that claim J&J’s talc-based products are carcinogenic.
Despite ongoing financial and public relations challenges, J&J maintains that its talc products, including the now-discontinued talc baby powder, are safe. Last year, the company allocated $400 million to address U.S. state consumer protection claims, but the settlement amount remains unconfirmed. Bloomberg first reported about the settlement earlier this month, citing sources familiar with the matter.
Interestingly, as part of its efforts to navigate the legal complexities surrounding talc litigation, J&J is considering moving toward Texas. The company has filed a request to relocate its LTL Management unit to Austin, possibly preceding a third bankruptcy court filing. This strategic move is seen as an attempt to leverage Texas law, which allows companies to assign liability from mass tort cases to a unit that can file for bankruptcy—a maneuver known as the “Texas Two-Step.”
J&J has previously attempted to put LTL Management into Chapter 11 bankruptcy twice, seeking to impose an $8.9 billion settlement on users of its talc products. However, the courts rejected both attempts, filed in the company’s home state of New Jersey. Despite opposition to bankruptcy filings from some legal experts and claimants, J&J is determined to pursue this avenue to resolve the talc litigation.
The business will have difficulty persuading judges of its financial hardship, which is required for bankruptcy filing. According to critics, it is contentious to use the bankruptcy court to coerce claims into settlements, and some legal experts believe there is little chance that a third bankruptcy case will succeed.
If J&J succeeds in a third bankruptcy filing, it could benefit financially and legally, delaying accountability and potentially impacting claimants outside of bankruptcy proceedings. This strategy allows the company to halt litigation while the bankruptcy case progresses.
Meanwhile, J&J faces numerous jury trials this year over allegations that it knew for over 50 years about the cancer-causing potential of talc in its baby powder. Despite winning some cases and maintaining the safety of its talc-based products, the company removed talc-based powders from the U.S. and Canadian markets in 2020, citing declining sales, and replaced them with a cornstarch-based version. J&J also pledged to eliminate all baby powders containing talcum powder worldwide by the end of the previous year.
As the legal saga continues, J&J remains committed to resolving talc-related issues through various means, including potential bankruptcy filings and settlement agreements. The consolidated case is titled “In Re Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation” in the U.S. District Court, District of New Jersey (Trenton).
