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Johnson & Johnson’s repeated attempts to use bankruptcy to resolve claims its talc-based baby powder caused cancer is preventing former users from getting their day in court, according to a new lawsuit.
In a proposed class action filed May 21 in New Jersey federal court, the New Brunswick-headquartered health care giant was accused of engaging in a series of fraudulent maneuvers that caused a two-year delay of scheduled jury trials and other types of resolution in the tens of thousands of cases.
The complaint was brought by five women who previously filed ovarian cancer suits against J&J for talc-related damages. It alleges several “mileposts” in the company’s strategy, including the 2021 creation of LTL Management, a subsidiary created to absorb talc liability.
Two prior attempts to resolve lawsuits through bankruptcy of LTL were nixed by federal judges. Both times, the petition was rejected with courts ruling the parent company was financially capable of paying claims without bankruptcy protection.
After the failure of the first bankruptcy motion, the lawsuit said J&J replaced a previous $61.5 billion funding agreement with one capped at $29.9 billion, a transaction done without LTL receiving equivalent value in return.
‘A dark game of chess’
The lawsuit names LTL, J&J CEO Joaquin Duato, CFO Joseph Wolk and other executives as individual defendants. Plaintiffs are represented by attorneys with the law firms of Ashcraft & Gerel, Bailey Glasser, Beasley Allen, Burns Charest, Golomb Legal and Levin Papantonio Rafferty.
In a statement, Mike Papantonio of Florida-based Levin Papantonio Rafferty, said, “Johnson & Johnson is playing a dark game of chess with this country’s financial and judicial systems. With a net worth of nearly $400 billion, this corporation has deliberately manipulated assets to sidestep its obligations to ovarian cancer victims and in so doing has robbed them of true and rightful justice.”
“The bad faith that the courts found in ruling against J&J in the two previous bankruptcies applies to every action the company has taken during the past three years,” commented Andy Birchfield of Beasley Allen in Alabama. “The individuals bringing this class action are shining a bright light on the entire series of dubious, unlawful and hypocritical ploys J&J has been following, and they’re saying enough is enough.”
Third time’s the charm?
Earlier this month, of more than 50,000 lawsuits claiming the company’s baby powder caused ovarian cancer. According to J&J, those claims make up 99.7% of all talc suits. The total includes about 54,000 cases centralized in a federal court proceeding in New Jersey.
Under the terms of the proposal, J&J would resolve the cases through a third bankruptcy filing of LTL. If 75% of claimants support the new plan, J&J will pay out over 25 years. The company said the offer“is a far better recovery than the claimants stand to recover at trial.”
It would also end litigation entirely — shutting off future lawsuits and preventing individuals from opting out of the deal to pursue their claims separately.
The move comes about a year after LTL’s second bankruptcy filing. At the time of its Chapter 11 motion in April 2023, the company proposed an $8.9 billion settlement to resolve current and future claims related to mesothelioma, a rare form of cancer linked to asbestos exposure.
After that deal was rejected, the company determined it was more practical to settle those claims outside of bankruptcy before addressing the much larger group of 85,000 to 100,000 ovarian cancer claims, Erik Haas, J&J’s worldwide vice president of litigation said during a May 1 call with investors.
He also said that J&J has faced hundreds of mesothelioma cases and has settled all but 153 lawsuits.
Additionally, the company has prevailed in about 95% of ovarian cancer cases tried to date.
More of the same
Moving forward, the company will continue to defend itself against the lawsuits while trying to gather votes for the settlement, according to Haas.
The company said it has set aside $11 billion to resolve all cancer claims, including a new charge of $2.7 billion in the first quarter of 2024.
J&J maintains its products are safe and do not cause cancer. It pulled its talc-based baby powders off the market worldwide over the last three years, replacing them with a cornstarch-based version.
In a May 23 statement, Haas said, “This latest filing – signed again by the same small group of plaintiffs lawyers who have fought every single effort to resolve this litigation to date – is more of the same.”
“Make no mistake, the facts are clear. The Company has offered one of the largest resolutions in the history of mass tort litigation. It has prevailed in 16 of 17 ovarian cancer trials, including every ovarian trial for the past six years. Beasley Allen, the ring leader of these efforts, has never collected a dime for its clients, despite a decades-long effort. Putting its own financial motive ahead of its clients, it does stand to lose hundreds of millions of dollars in attorney fee recoveries if the claimants are paid through a bankruptcy trust,” Haas said.
“Our focus has been and will remain reaching a full, fair and final resolution of this litigation, and allowing the claimants to speak for themselves. We will immediately move to dismiss this latest ‘hail Mary’ frivolous filing,” he added.
