Johnson & Johnson Considers 3rd Bankruptcy for Talc Litigation
Johnson & Johnson may be filing for bankruptcy for a third time in an attempt to address its talc liabilities, this time under a different corporate structure. The pharmaceutical giant has twice failed at “Texas Two-Step” filings to resolve mass tort litigation against it.
Roughly 51,000 lawsuits filed against Johnson & Johnson claim the company’s talc-based products caused them to develop cancer. Johnson & Johnson’s two Chapter 11 bankruptcy filings through its subsidiary, LTL Management, were both denied by a New Jersey judge who found LTL did not qualify for bankruptcy protection because it was not in financial distress.
The Texas Two-Step strategy is when a company facing lawsuits tries to transfer its legal liabilities to a subsidiary and then initiate bankruptcy proceedings for the subsidiary. This allows the company to separate its liabilities from its assets and protects the main company.
J&J is now considering moving the talc cases to Texas in a bid for a potential third bankruptcy filing, according to the Wall Street Journal. The news outlet cited unnamed sources “familiar with the company’s planning.” Bloomberg earlier reported the same information.
In order to move the filing to a Texas court, Johnson & Johnson would have to involve one of its existing business units located there to establish a venue, according to the news outlet. On a recent earnings call, Johnson & Johnson said that ahead of any bankruptcy filing it would put a settlement offer to a vote among ovarian cancer patients who claim Johnson’s Baby Powder caused their illness, the WSJ reports.
Johnson & Johnson did not publicly comment on the potential venue change or future bankruptcy proceedings.
Talc and Asbestos Contamination
A 2018 investigative report by Reuters found Johnson & Johnson knew of asbestos contamination in its talc products tracing back decades. Tests from different labs found asbestos in J&J’s talc from 1971 to the early 2000s, but the company failed to report the findings to the U.S. Food & Drug Administration.
In 2019, the FDA found traces of asbestos in a bottle of Johnson’s Baby Powder, prompting a recall of 33,000 bottles. J&J stopped selling products containing talc in the United States and Canada the following year but continued to sell them worldwide. It halted all sales of talc-containing products this year, but will continue to make cornstarch-based baby powder.
Talc is one of the softest minerals on Earth and is used in many products, including paints, ceramics and construction materials. It’s also an ingredient in personal hygiene products. Asbestos naturally occurs in many talc deposits and can contaminate the mineral. Asbestos is toxic and can accumulate in the body and cause diseases such as ovarian cancer, lung cancer and mesothelioma.
People who were exposed to asbestos-contaminated talc and have been diagnosed with cancer or other asbestos-related diseases can be compensated through legal action such as claims with asbestos trust funds or filing personal injury lawsuits. Asbestos lawyers are actively taking new cases, while J&J maintains its products are safe.