Johnson & Johnson Subsidiary Files for Bankruptcy Again to Push $8 Billion Talc Settlement

Johnson & Johnson’s Red River Talc unit has filed for bankruptcy for the third time as the healthcare giant aims to advance an $8 billion proposed settlement to resolve around 62,000 lawsuits alleging that its baby powder and talc products caused cancer. The filing was made in the U.S. Bankruptcy Court for the Southern District of Texas, following two rejections by federal courts.

The lawsuits claim that J&J’s talc products were contaminated with asbestos, leading to ovarian and other cancers, which the company denies, asserting its products are safe. After gaining support from approximately 83% of current claimants for its bankruptcy plan, J&J is pursuing a “Texas two-step” bankruptcy strategy. This approach involves transferring its talc liabilities to a newly formed subsidiary that files for Chapter 11 bankruptcy, facilitating a reorganization of assets and debts under court supervision.

This maneuver aims to consolidate claims and enforce a global settlement that would prevent future lawsuits. Unlike previous attempts, this filing specifically addresses ovarian and gynecological cancer claims, building on earlier settlements with state attorneys general and individuals who developed mesothelioma due to asbestos exposure.

Despite garnering support from claimants, J&J’s bankruptcy strategy still faces significant legal challenges, including a recent Supreme Court ruling on Purdue Pharma’s bankruptcy, prior court dismissals of its efforts, and proposed federal legislation aimed at restricting bankruptcy protections for financially stable companies like J&J.