HOUSTON (Legal Newsline) - A "heavily negotiated" plan to end tens of thousands of ovarian cancer claims with a $9 billion fund that has "significant support" can't be confirmed, a Houston bankruptcy judge has ruled.
Judge Christopher Lopez cited voting issues and releases from liability of third parties on March 31 in rejecting Johnson & Johnson's attempt to settle 90,000 claims that talc was used in its Baby Powder and caused ovarian and other cancers.
"Today's decision highlights the broken tort system in the United States," said Erik Haas, worldwide vice president of litigation at J&J..
Proponents of the plan said they had the support of more than 75% of claimants and last year, after bumping the fund up $1.1 billion, had the backing of most plaintiff firms. J&J was hoping to use a spinoff company, Red River Talc, that was designed to go bankrupt to pay claimants through a trust rather than in various courtrooms that are clogged with so many lawsuits the plaintiffs might never see their day in court.
Lopez said he could not certify the votes of claimants based on how the case played out.
"First, the pre-petition vote cannot be certified," he wrote. "Plaintiffs' firms voted tens of thousands of claims without either hearing directly from their clients or having the requisite authority to do so.
"They did not do it in bad faith. One firm was put in a bad spot due to solicitation issues that were not its fault. Others improperly relied on general language in engagement letters in hopes of getting this plan over the 75% threshold."
Having a vote count before the bankruptcy petition was filed, plus an "unreasonably" short voting time for many of the claimants, "was all done to get to 75% at any cost," Lopez wrote.
In response, Johnson & Johnson put out a press release announcing its "return to tort system to defeat meritless talc claims." The company says it is 16-1 in ovarian cancer cases in the last 11 years.
It is one of the reasons plaintiffs lawyers supported the plan, which was estimated to give claimants twice more than what they would on average recover in civil courts. Other gynecological cancer claims were deemed worthless, but those claimants would have obtained something from the bankruptcy trust.
"The disclosures made under oath in the Red River bankruptcy affirmed that the talc litigation is a plaintiff-lawyer driven fake tort, premised on junk science and fueled by third-party litigation financing including from foreign sovereign wealth funds," J&J said.
"Consequently, the company has no intent to settle or pay plaintiff lawyers on such meritless claims."
The firm Beasley Allen was most critical of the voting process. It sued a former business partner, the Smith Law Firm, for flip-flopping after J&J offered more money and motioned several times to have votes from other firms discounted because of how they were collected. It even asked for a new vote. The Smith firm was motivated to accept the plan to repay $240 million a litigation funder provided, Beasley Allen said.
When OnderLaw tried to add a master ballot of its clients' votes earlier this year, Beasley Allen, through its the Coalition of Counsel for Justice for Talc Claimants, objected.
"The firm's apparent change of heart, however well-intentioned it may be, cannot suffice to permit a late ballot - particularly when it comes, without any timing justification, on the literal eve of a two-week trial," the Coalition wrote.
"The motion makes no mention of ever having contacted these claimants about how to cast their votes. It does not state whether they were made aware that OnderLaw... was attempting to have their votes cast after the deadline."
Beasley Allen was one of the few holdouts among plaintiffs firms. It is co-lead counsel in a federal multidistrict litigation in New Jersey, where it will be entitled to a share of a possible common fees fund.
J&J's extra offer included $650 million for lawyers in the Houston bankruptcy.
"The Court has unfortunately allowed a couple of law firms with financially conflicted motives, who have conceded they have not recovered a dime for their clients in a decade of litigation, to defeat the overwhelming desire of claimants," Haas said.
Next up are motions to exclude plaintiff experts and disqualify lead counsel in the New Jersey MDL.