Johnson & Johnson files for second bankruptcy to settle talc cancer claims worth $8.9 billion

In an announcement on Tuesday, Johnson & Johnson said it would pay a settlement of $8.9 billion over the next 25 years to resolve allegations that the company's baby powder and other talc products are linked to cancer.

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An announcement of the proposed settlement was made in the company's securities filing. After its initial Chapter 11 bankruptcy filing was thwarted, J&J's subsidiary LTL Management announced that it would file again for Chapter 11 bankruptcy protection.

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There are more than 60,000 claimants who have signed a commitment supporting the proposed resolution, which is subject to approval in bankruptcy court, according to the filing.

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“A proposed reorganization plan that will resolve this matter is both a more equitable and efficient method of resolving this matter. It allows claimants to receive compensation in a timely manner, and it allows the Company to continue to focus on its commitment to profoundly and positively affect the health of humanity," Erik Haas, J&J's worldwide vice president of litigation, said in a statement.

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The allegations against J&J regarding talc, however, were still pushed back on by the company. 

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“The Company continues to believe that these claims lack scientific merit and are speculative,” Haas added.

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Due to thousands of lawsuits filed against the company as a result of customer claims that its talc-based baby powder caused cancer due to asbestos contamination, the company stopped selling its talc-based baby powder globally this year.

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Several years ago, J&J spun off its LTL management company as a way to reduce its losses from litigation and settlements as much as possible. In the wake of the talc lawsuits, the company funneled them all to the subsidiary and immediately filed for bankruptcy protection.

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J&J has been able to use the Chapter 11 strategy in February 2022 after a judge affirmed their right to do so.

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On the other hand, the U.S. Court of Appeals for the 3rd Circuit overturned the ruling in January of this year, stating that neither LTL nor J&J had a legitimate need for bankruptcy protection because they were not in "financial distress.".

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As one of the lead attorneys in the talc lawsuits, Leigh O'Dell told Trade Algo at the time, the ruling was another step toward ending J&J's "attempt to abuse the bankruptcy court system" in order to evade its legal obligations.

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The CEO of J&J, Howard O'Dell, told Trade Algo on Tuesday that J&J is "seeking an extremely deep discount on justice and is not offering much other than another bankruptcy and more delays, delays, delays", according to a statement.

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“It should be regarded as a shameful attempt to extend the clock on people who are dying of cancer and try to persuade some lawyers to give up their fight,” she said.

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Mikal Watts, a plaintiff lawyer, who was involved in negotiating the proposed settlement, stated that J&J had committed to paying "fair compensation to these deserving women" who had suffered cancer after being exposed to the talc products. "It is our job to make sure that our clients are fairly compensated for their injuries, and this settlement is the culmination of a job well done on our part."

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There were rumors that Johnson & Johnson was going to take the case all the way to the Supreme Court last month.

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An annual filing by the company showed that in the period from 2020 to 2021, the company spent $7.4 billion on litigation expenses. The company cited the talc litigation as a major contributor to the company's legal costs during the period in question.