A federal bankruptcy judge held in Houston on Monday rejected a request for Johnson & Johnson to approve a $9 billion settlement with tens of thousands of people suing the company, claiming that the talcum powder product caused cancer.
The proposal would have resolved almost all current and future claims that the company's talc products contained asbestos, causing cancer. Similar to the two efforts before 2021 and 2023, the transaction attempted to resolve claims using elements of the bankruptcy system.
Johnson & Johnson argues that the product did not contain asbestos and there was no proven link between the product and cancer, Judge Christopher Lopez wrote in his ruling. Johnson & Johnson has long denied these claims, but in recent years they have stopped selling talc-based baby powders around the world.
More than 90,000 claims against Johnson & Johnson and the other parties are pending, too many for the court to handle them individually.
The attempt to settle by the company and lawyers for the plaintiffs that filed the claim was opposed by the Justice Department's bankruptcy counsel and the other plaintiffs' lawyers, the judge said.
“The court, unfortunately, has granted law firms with financially inconsistent motives in decades. They have admitted that they have not recovered DIME for their clients in a 10-year lawsuit in order to beat the overwhelming desires of claimants,” Johnson & Johnson said in a statement Monday.
“We'll return to the tort system to litigate and defeat these useless talc allegations rather than pursue long-term appeals.” It added that what he had saved to resolve the bankruptcy would overturn about $7 billion.
Johnson & Johnson manufactures medicines and consumer products, including band-aids and listerine, and spent years claiming that their baby powder was safe. Internal notes showed that inside the company, talc is worried that it will be contaminated with asbestos, a known carcinogen.
Since 2021, critics have argued that Johnson & Johnson is trying to incorporate the unfair benefits of protections offered to businesses in bankruptcy courts. That year it created a subsidiary, LTL Management, avoiding the claims of baby powder. A day later, LTL declared bankruptcy.
Johnson & Johnson then announced that New Jersey's bankruptcy filing was intended to resolve the lawsuit “in a way that is fair to all parties.” The company said it would fund the amount the Bankruptcy Court found LTL owed.
The plaintiff's lawyers have eased the creation of LTL and its near-immediate bankruptcy, as an example of “Texas Two Stages.” In January 2023, a federal judge refused to file for bankruptcy for LTL.
Three months later, the company announced it had reached a contract that would pay tens of thousands of claimants over 25 years. This attempted to end a lawsuit that had been going on for over a decade. The plaintiff's lawyers in the case called the settlement a “great victory for tens of thousands of women suffering from gynecological cancer caused by J.&J.'s talc-based products.”
The US Court of Appeals for the Third Circuit rejected the settlement twice. Johnson & Johnson tried again this time in Texas, and Judge Lopez refused. He found that the plaintiff's attorneys did not adequately ensure sufficient claimant consent. He also discovered “an irregularity in solicitations that involves unfairly short voting times for thousands of creditors,” he wrote.
“The court's decision is not easy, but it's the right thing to do.”
