MONTGOMERY, Ala. (Legal Newsline) - A federal judge won't recuse himself from litigation involving lawyers bickering over Johnson & Johnson's proposed multibillion-dollar plan to resolve lawsuits alleging its talcum powder causes cancer.
The Smith Law Firm called for Alabama judge R. Austin Huffaker, Jr., to step down from the case because, as an attorney, he had previously represented the firm Beasley Allen, which sued Smith last year.
Beasley Allen accused Smith and Porter Malouf for breach of contract regarding talc claims, with Beasley Allen also alleging Smith supports J&J's massive settlement because it owes as much as $240 million to an outside litigation funder.
Things could come to a head in a hearing this month in Texas, where J&J has used a subsidiary to file a bankruptcy that would have talc claimants being paid out similar to other asbestos claimants who receive money from dozens of trusts without having to take to civil courts.
That eliminates the potential for jackpot jury verdicts and puts a wet blanket on plaintiff lawyers' quest for large fees. It also pays out claimants quicker and limits costs for both sides.
Smith wants the deal approved, while Beasley Allen does not. In the offshoot litigation, Smith moved for Huffaker to recuse himself after a Dec. 10 hearing during which Huffaker disclosed his previous work for the Beasley firm.
"Given Your Honor's prior advocacy in private practice for Plaintiff, a disinterested observer could reasonably question the Court's impartiality in this action," Smith's lawyers wrote Dec. 18.
Huffaker, a federal judge since 2019, responded that several issues should be considered, like how long it has been since he performed work for Beasley Allen and the nature of that work. Also, he said, whether he kept any personal relationships with lawyers at that firm should be questioned.
Huffaker worked for 20 years at Rushton, Stakely, Johnston & Garrett.
"Over the last 15 years of my practice, a large percentage of my practice involved representing attorneys across the State of Alabama in various legal matters in which they found themselves - legal malpractice, disciplinary matters before the Alabama State Bar, human resource matters, attorney separation and attorney fee disputes," Huffaker wrote.
"Beasley Allen was just one of numerous other law firms and attorneys that I represented over the years. That representation was occasional over the course of the years and constituted a small fraction of my overall client base and revenue generations on a year-to-year basis."
Given he hasn't worked as an attorney for five years and that he retained no close social or personal ties, Huffaker said he won't step down.
For the upcoming hearing on J&J's bankruptcy, Smith Law Firm, which has sued Beasley Allen in Mississippi for a breach of contract and defamation related to the J&J plan, says it has the approval of a majority of women claiming they contracted ovarian cancer from using Baby Powder and other types of cosmetic talc.
Beasley and the U.S. Trustee say those approvals are illegitimate and J&J shouldn’t be allowed to ram through settlements in bankruptcy court while the parent company remains solvent.
Those and other issues will be aired at a Jan. 27 hearing before U.S. Bankruptcy Judge Christopher M. Lopez in Houston, who must decide whether to approve J&J’s plan to channel all of its ovarian cancer claims through a special-purpose vehicle called Red River Talc.
The so-called “Texas Two-Step” maneuver has failed twice before, as judges in New Jersey and the Third Circuit Court of Appeals ruled J&J can’t shove off its tort liabilities into an entity formed for the sole purpose of filing for bankruptcy.
J&J filed a prepackaged plan in Houston in September, over objections the bankruptcy belongs in the company’s home state of New Jersey.
Supporters of the plan say it’s the only realistic way to settle some 40,000 claims by women who say their cancer was caused by asbestos-tainted talc. Johnson & Johnson has won most of the cases that have gone to trial so far and maintains there was never asbestos in its products.
But a few devastating losses, including a $2.1 billion verdict in Missouri, forced the company to enter settlement negotiations. Defending the cases has cost J&J $10-20 million a month and trying each one in court would take decades, with wildly different results for individual plaintiffs.
Proponents, including the Smith firm, say bankruptcy offers a faster and fairer process for compensating cancer plaintiffs. The latest bankruptcy plan would place some $9 billion in a fund to pay present and future cancer claimants – excluding much higher-value mesothelioma claims – including $650 million in a fund to cover a shared portion of plaintiff legal fees.
The Smith firm split with Beasley Allen after J&J added about $1.5 billion to the plan, including the fee fund, leading Beasley Allen and other critics to say they had been bought off. Smith says the $650 million fee fund will be managed by a retired judge and distributed to all plaintiff lawyers.
Beasley Allen is asking the court to accept 12,000 votes against the plan it submitted earlier this year, using a negative-option process in which clients who didn’t respond to an email seeking their vote were presumed to have approved it. The Smith firm, which shares representation with most of those clients, later used a similar process to claim 83% of those same plaintiffs approved the plan.
Beasley Allen has also accused the Smith firm of “stuffing the ballot box” with “meritless,” “non-compensable” gynecological claims, meaning they involve illnesses other than the ovarian cancer plaintiff experts say can be caused by exposure to talc.
Beasley Allen also has accused the Smith firm of acting at the behest of outside funders it owes some $240 million, money largely spent on advertising campaigns to recruit clients. In a recent court filing, J&J said it also wants to find out about outside funding, saying it believes Beasley Allen has outside investors and it needs to “understand who the true party in interest is and who is driving Beasley Allen’s adamant refusal to resolve these claims.”