Johnson & Johnson Subsidiary to Declare Bankruptcy, Adds $1.1B to Talc Settlement
September 4 (Reuters) – Johnson & Johnson (JNJ.N) is set to increase its settlement offer by an additional $1.1 billion to resolve ongoing legal actions involving its baby powder and other talc products, which are alleged to have caused cancer. This latest addition would bring the total settlement to over $9 billion, to be paid out over the next 25 years.
Settlement Details
On Wednesday, Johnson & Johnson announced that it reached an agreement with plaintiffs’ lawyer Allen Smith, who represents 12,000 clients. Smith has agreed to recommend the settlement to his clients, adding to the support already received from other claimants. The healthcare giant intends to have a subsidiary file for bankruptcy to finalize the settlement before the end of the month. This move would allow J&J to continue its operations without filing for Chapter 11 itself.
Bankruptcy Plan
The planned bankruptcy filing by the subsidiary is part of J&J’s strategy to resolve the litigation through what is known as a “Texas two-step” bankruptcy. This process involves transferring the talc liabilities to a newly created subsidiary, which then files for Chapter 11 bankruptcy. This approach aims to settle all claims in one go without J&J itself having to declare bankruptcy.
Legal and Financial Implications
Johnson & Johnson has maintained that its talc products are safe and do not cause cancer. Despite this, the company’s settlement offer, which has faced criticism and opposition from some attorneys, is intended to address allegations that the talc caused ovarian and other gynecological cancers. The increased settlement amount raises the total cash payout to over $9 billion, from an earlier estimate of $8 billion over 25 years. The settlement offer is expected to garner support from over 75% of the claimants, which is the legal threshold required for a judge to approve the bankruptcy settlement.
Opposition and Future Outlook
Despite the settlement’s progress, some lawyers, including Andy Birchfield, oppose J&J’s plan. Birchfield’s law firm represents a substantial number of clients who have already rejected J&J’s settlement offer. The company’s latest offer does not cover claims related to mesothelioma, a cancer linked to asbestos, which J&J insists is not present in its talc products.
Settlement Status
The settlement proposal comes after two unsuccessful attempts to resolve the litigation through federal courts. J&J is now focusing on securing the necessary support from claimants to move forward with the bankruptcy plan and address the allegations related to its talc products.
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