J&J talc unit asks judge to halt cancer lawsuits

A Johnson & Johnson subsidiary is again asking a US judge to pause tens of thousands of lawsuits alleging the company's baby powder and other talc products cause cancer, as it seeks to resolve the litigation in bankruptcy after a federal appeals court found its first attempt improper.

At a hearing yesterday in Trenton, New Jersey, a lawyer for LTL Management argued the lawsuits, which are already stayed against LTL, should also be stopped against J&J, which has a market value of over US$430 billion and has not filed for bankruptcy itself.

LTL has said litigation against J&J would imperil its effort to negotiate a comprehensive settlement of all current and future talc claims in its bankruptcy.

Two groups of cancer plaintiffs and the US Department of Justice's bankruptcy watchdog have opposed the company's bid for a stay, arguing it is a fraudulent attempt to evade the earlier court ruling and that the second bankruptcy has "slim to non-existent prospects" of success.

LTL attorney Greg Gordon pushed back on those arguments at the start of the hearing, saying "the likelihood of a successful reorganisation is very high".

Bankruptcy strategy

LTL believes it now has the support of 70,000 to 80,000 claimants, enough to meet the 75 percent voting threshold required for a bankruptcy court to approve the settlement and make it binding on all claimants, Gordon said.

Michael Winograd, an attorney representing talc claimants, said J&J does not have support from a single claimant, only agreements with lawyers who would recommend the deal to their clients.

J&J has exaggerated the level of support for the settlement to distract from the fact that LTL's bankruptcy strategy had already been ruled illegal, he added.

"Like anyone trying to pull off a magic trick, you have to have a diversion," Winograd said.

More than 38,0000 talc lawsuits have been on hold since LTL first filed for bankruptcy in 2021. Plaintiffs argue they should be allowed to proceed with their lawsuits that allege the talc products caused various forms of cancer after a federal appeals court nixed the company's attempt to offload the litigation in bankruptcy.

The Philadelphia-based third US Circuit Court of Appeals in January ruled LTL was not eligible for bankruptcy because it was not in "financial distress".

Second shot

Before the talc lawsuits could resume, LTL filed for bankruptcy a second time, reopening the legal battle over the bankruptcy's legitimacy.

It has said its second bankruptcy is different because it has less funding available and more plaintiff support for a settlement.

J&J has offered $8.9 billion (about RM39 billion) to settle the claims, including US$6.5 billion for ovarian cancer claims, US$2 billion for mesothelioma claims, and US$400 million to settle consumer protection and false marketing claims brought by state attorneys general. The company has said its baby powder and other talc products are safe and do not cause cancer.

The company yesterday reported overall sales of US$24.7 billion for the first quarter but posted a net loss of US$68 million due to a one-time charge related to LTL's second bankruptcy filing.

J&J's effort to settle its talc liabilities in bankruptcy began in October 2021. The company divided its consumer business in two and offloaded the talc lawsuits onto its newly created subsidiary, LTL, which almost immediately filed for Chapter 11 in an effort to halt the litigation avalanche and force plaintiffs into a global settlement.

US bankruptcy judge Michael Kaplan agreed to protect J&J from lawsuits during LTL's first bankruptcy, saying at the time it offered the best way to fairly resolve all of the talc lawsuits together.

Kaplan, who is also presiding over the second bankruptcy, said he will rule tomorrow on LTL's request to stop the lawsuits again and to give the company a second shot at a bankruptcy settlement.

- Reuters