J&J subsidiary files for bankruptcy to advance $8 billion talc settlement

A major healthcare company has filed for bankruptcy for the third time as part of its efforts to resolve thousands of lawsuits related to its talc products. The company faces over 62,000 claims alleging that its baby powder and other talc-based products caused cancer, including ovarian cancer. The company denies these allegations and maintains that its products are safe.

This latest bankruptcy filing is part of a legal strategy known as a ‘Texas two-step.’ The approach involves creating a subsidiary to hold the talc-related liabilities and then having that subsidiary declare bankruptcy. The goal is to consolidate all lawsuits into a single settlement through the bankruptcy process, without requiring the parent company to file for bankruptcy itself.

The company reports that it has gained support from approximately 83% of current claimants for its proposed bankruptcy plan. This level of support exceeds the 75% threshold typically needed for a bankruptcy judge to impose a settlement on all plaintiffs.

This third attempt at resolving the litigation through bankruptcy differs from previous efforts in several ways. It focuses specifically on ovarian and other gynecological cancer claims, building upon earlier settlements with state attorneys general and individuals who had sued after developing mesothelioma.

However, the company’s bankruptcy strategy still faces significant legal challenges. These include a recent Supreme Court decision involving a pharmaceutical company’s bankruptcy, court orders dismissing its previous efforts, and proposed federal legislation aimed at preventing financially stable companies from using bankruptcy protection in this manner.

The ongoing legal battle highlights the complex interplay between mass tort litigation, corporate strategy, and bankruptcy law in addressing large-scale product liability claims.