J&J talc unit faces skepticism on bankruptcy settlement support

By Dietrich Knauth

(Reuters) – A Johnson & Johnson (NYSE:) company on Tuesday defended its second attempt to resolve talc lawsuits in bankruptcy, telling a U.S. judge it can quickly build consensus around its $8.9 billion settlement offer despite doubts about its assertion that 60,000 plaintiffs would support the deal.

The proposed settlement has divided lawyers representing cancer victims, many of whom claimed ahead of Tuesday’s court hearing before U.S. District Judge Michael Kaplan in Trenton, New Jersey that J&J had created the illusion of widespread support for a deal that would deny plaintiffs just compensation.

Linda Richenderfer, an attorney for the U.S. Trustee – the U.S. Department of Justice’s bankruptcy watchdog – said in court that J&J subsidiary LTL Management had not adequately explained its assertion that two-thirds of talc claimants would support the deal, especially given opposition from lawyers representing plaintiffs who were active in LTV’s first bankruptcy.

“We just can’t reconcile that with the numbers that were in front of us in the first bankruptcy case,” the DOJ’s Linda Richenderfer said. “Where are these claimants coming from and who are these claimants?”

Kaplan said he shared Richenderfer’s concerns, but would not take any action to stop LTL’s second bankruptcy filing until he gets more information.

J&J faces more than 38,000 lawsuits that have been consolidated in federal court in New Jersey alleging that its talc products sometimes contained carcinogenic asbestos, and those cases have been on hold while LTL pursues a bankruptcy settlement. J&J has said its baby powder and other talc products are safe, do not cause cancer or contain asbestos.

In 2021, J&J divided its consumer business in two and offloaded the talc lawsuits onto a newly created subsidiary that almost immediately filed for Chapter 11, a tactic that could halt the lawsuits and force plaintiffs into a global settlement in bankruptcy court.

LTL’s first bankruptcy case was dismissed as improper after the 3rd U.S. Circuit Court of Appeals ruled that the company was not in “financial distress.”

LTL attorney Greg Gordon said at Tuesday’s court hearing that the second bankruptcy is different because the company has fewer assets available and more support for a bankruptcy settlement.

Lawyers for those who say use of J&J’s talc products caused cancer on Tuesday spoke for and against the settlement, a day after a faction of plaintiffs alleged that J&J’s settlement was “fraudulently and collusively” co-signed by plaintiffs’ attorneys with “exaggerated” numbers of clients.

Gordon called that an “over the top accusation,” saying plaintiffs’ support for the settlement is real and substantial. Any doubts about it could quickly be put to rest by allowing them to vote on the settlement, he added.

David Molton, who represented the official committee of talc claimants in LTL’s first bankruptcy, said the second bankruptcy filing must be dismissed so that cancer victims can have their day in court.

“Hundreds of victims of J&J’s products have died waiting for justice to be done,” Molton said.

Mikal Watts, who represents clients who support the deal, said that the settlement offers the first real chance for women with cancer to get a payout from J&J. The women should have a chance to vote on the existing deal, Watts said.

Gordon said LTL is “still getting a handle on” the total number of talc claims, but it believes it has support from two-thirds talc claimants.

LTL’s proposed settlement would address not only the cases that are pending in federal court, but also cases that have not yet been filed.

It expects to file a formal bankruptcy plan by May 14.