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Johnson & Johnson JNJ announced that a bankruptcy court in Texas has rejected its bankruptcy plan to resolve talc lawsuits for the third time.
J&J faces more than 62,000 lawsuits for its talc-based products, primarily its baby powders. The lawsuits allege that its talc products contain asbestos, which caused many women to develop ovarian and some other cancers. J&J insists that talc-based products are safe and do not cause cancer. J&J has permanently discontinued the sale of its talc-based Johnson’s Baby Powder globally.
J&J’s 3rd Bankruptcy Filing in Texas After Two Failed Attempts
In September, J&J, via a subsidiary called Red River Talc, filed for voluntary bankruptcy in the Southern District of Texas after it received the support of around 83% of current claimants for the proposed bankruptcy plan, above the 75% required by the U.S. bankruptcy code. Red River also increased its settlement commitment by $1.75 billion to approximately $8 billion.
However, the U.S. Bankruptcy Court for the Southern District of Texas rejected the proposed bankruptcy plan to settle claims after a two-week trial in Houston. The court said that the vote of claimants on the proposal was flawed.
Earlier, J&J’s subsidiary, LTL Management, which was established to manage claims in the cosmetic talc litigation, filed for voluntary bankruptcy twice in New Jersey. However, both bankruptcy filings were rejected by courts, stating that J&J was not in enough financial stress to qualify for bankruptcy.
J&J’s stock declined 2.4% in after-hours trading on Monday. So far this year, J&J’s shares have risen 14.7% compared with the industry’s 3.4% increase.
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Instead of appealing against the Texas court’s decision, J&J will go back to the traditional tort system to fight the lawsuits individually. The company will reverse approximately $7 billion previously reserved for settlements.
Several Rulings Against J&J in Talc Lawsuits
Several juries have ruled against J&J in talc lawsuits over the years. In one such ruling, in 2018, J&J was ordered by a Missouri court to pay $4.7 billion in damages to 22 women who made such allegations, affirming a St. Louis court jury’s verdict given earlier. Though the verdict was reduced to $2.1 billion by an appeals court in June 2020, it still rejected J&J’s appeal to overturn the 2018 jury verdict. J&J paid the award, which, including interest, totaled approximately $2.5 billion. In April 2023, J&J offered to pay $8.9 billion over a period of 25 years to completely resolve its cosmetic talc litigation.