NEW BRUNSWICK, N.J. (Legal Newsline) – After Johnson & Johnson made an offer to increase its settlement proposal by $1 billion to plaintiffs claiming its cosmetic talcum powder gave them cancer, the offer garnered the support of one member of plaintiff counsel who had previously rejected such proposals.
Johnson & Johnson found itself in this situation after plaintiff lawyers hired scientific experts who claimed to find asbestos contamination in cosmetic talc. Johnson & Johnson denies there was any asbestos in its talc products, but enough judges have allowed plaintiff experts to testify in court that juries have delivered unpredictable and sometimes huge verdicts, including $4.7 billion – since reduced to $2.1 billion – which a Missouri jury ordered J&J to pay to 22 women with ovarian cancer.
Faced with the risk of crippling liability, J&J tried to settle talc litigation by creating a special subsidiary called LTL Management and placing it in bankruptcy in 2021, with a promise from the parent company to pay up to $60 billion to settle claims. The U.S. Court of Appeals for the Third Circuit threw that bankruptcy out, ruling J&J’s rich guarantee meant LTL wasn’t in financial distress.
J&J tried again by reducing its commitment to $30 billion, but that was rejected as well. Now, the company has proposed a third attempt with the support of lawyers representing more than 75% of ovarian-cancer talc claimants, through a bankruptcy filing in a Texas federal court.
The plan, if successful, would be one of the largest settlements for a mass tort and would see J&J pay in excess of $9 billion over 25 years.
It would specifically be directed to only the strongest talc-related exposure claims, including those for ovarian cancer and also net smaller, guaranteed financial payments for those who claims may not prevail in court. Meanwhile, J&J would avoid defending against each individual suit in court and then rolling the dice at trial.
A proponent of the proposal is Allen Smith, an attorney who filed the first talc exposure lawsuit against J&J 15 years ago and who, until now, has staunchly opposed the company’s prior attempts to resolve the claims in bankruptcy court.
What changed Smith’s mind this time around, according to The Wall Street Journal, was J&J’s promise to sweeten the financial pot and lessen the wait for claimants to receive their settlement proceeds.
Inquiries made by Legal Newsline asking for comment from Smith ultimately went unreturned.
The proposed settlement plan is opposed by Beasley Allen, a Texas law firm which, alongside Smith, represents thousands of claimants – and which says the proposal both doesn’t pay enough, and that it can get more for its clients in court.
Beasley Allen has since sued Smith's firm, alleging it now wants the settlement approved in order to pay outside funders of the litigation.
Beasley Allen partner Andy Birchfield issued a statement on J&J’s settlement proposal.
“Our singular objective is fair compensation for our clients and also certainty that they will be compensated in a timely manner. The pain and suffering cancer victims have endured at the hands of Johnson & Johnson requires our total commitment to justice,” Birchfield said.
But those in favor of the settlement say such an arrangement is preferable to waiting years, and potentially, many years for their cases to be heard in a courtroom. And that by the time the majority of the cases have been resolved, the lion’s share of financial recovery may be gone.
When lawyers seek clients for a mass tort, like they’ve done with products like Roundup and talc, they get so many potential claimants that the normal litigation system breaks down.
The prospect of driving a company into liquidation inspires a “race to the courthouse” that “can destroy going concern value and lead to the dismemberment of valuable firms,” wrote University of Chicago Law School Professor Anthony Casey and Joshua Macey of Yale law in a 2023 article titled, “In Defense of Chapter 11 for Mass Torts.”
“When a firm is unable to pay all its tort claims, claimants who file early, or who find themselves before a sympathetic jury, or whose injuries happen to manifest quickly, may receive a large payout. Late claimants risk being left with nothing.”
The U.S. Supreme Court delivered a curveball to J&J’s strategy this year by striking down agreements that previously allowed non-bankrupt parties to buy their way out of mass-tort liability by putting money into a company’s bankruptcy plan.
The opinion, written by Justice Neal Gorsuch, found Purdue Pharma couldn’t protect the founding Sackler family from opioid lawsuits in exchange for $6 billion in bankruptcy funding, unless all opioid claimants agreed.
This contrasts with the treatment other creditors get in bankruptcy, where a judge can compel a settlement with only majority approval.
Justice Brett Kavanaugh dissented, saying the decision will only make it harder for tort claimants to receive compensation.
“Outside of bankruptcy,” Kavanaugh wrote, victims face “significant administrative costs” of multidistrict litigation, “which has limited coordination mechanisms and no tools for binding future claimants.”
Chief Justice John Roberts concurred with Kavanaugh’s dissent.
From Legal Newsline: Reach Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com