J&J faces key court test over $10 billion talc settlement

Johnson & Johnson seeks court approval for its third bankruptcy bid to resolve talc-related lawsuits.

A Johnson & Johnson banner is displayed on the front of the New York Stock Exchange in New York City, U.S., on December 5, 2023. Photo by Brendan McDermid/Reuters

By Alana Salsabila and Nada Fadiyah

Johnson & Johnson is facing a pivotal legal battle as it attempts to secure approval for its $10 billion proposal to settle thousands of lawsuits alleging its baby powder caused ovarian cancer. The pharmaceutical giant’s latest bankruptcy strategy will be tested in a Houston courtroom, where U.S. Bankruptcy Judge Christopher Lopez will weigh arguments for and against the plan in a hearing set to last several weeks.

J&J, which has faced more than 62,000 lawsuits over claims that its talc-based products were contaminated with asbestos and caused cancer, has already seen two previous bankruptcy attempts rejected by courts. However, the company believes this third attempt stands a better chance of success due to increased support from plaintiffs who have voted in favor of the proposed settlement.

A crucial test for J&J’s bankruptcy strategy

The hearing, which will continue until the end of February, will determine whether J&J’s subsidiary can use Chapter 11 bankruptcy protection to resolve the lawsuits. If approved, the bankruptcy would allow J&J to cap its liability at $10 billion while preventing future talc-related lawsuits. However, opponents argue that the proposal unfairly forces claimants to accept lower settlements rather than pursuing full compensation through traditional litigation.

Judge Lopez will evaluate key issues, including the validity of the votes supporting the settlement and whether a financially robust company like J&J should be allowed to use bankruptcy as a shield against lawsuits.

J&J has defended its strategy as the best path to providing compensation to cancer victims while avoiding lengthy and uncertain legal battles. Erik Haas, the company’s vice president for litigation, stated that the proposal has "overwhelming support" from claimants and offers a more equitable outcome than individual trials, which could result in inconsistent verdicts.

Opposition challenges J&J’s settlement plan

Despite J&J’s claims of broad support, some plaintiffs and legal experts argue that the bankruptcy settlement is deeply flawed. Critics contend that the process forces those affected by talc-related cancers to accept settlements they may deem inadequate, while also stripping them of their right to take J&J to court.

Opponents also claim that J&J’s vote-gathering process was flawed, potentially skewing the appearance of widespread backing for the settlement. They argue that J&J is leveraging the bankruptcy system to coerce cancer victims into accepting a deal that primarily benefits the company by limiting its financial exposure.

The outcome of the case could set a significant precedent for corporate liability in mass tort litigation. If J&J’s plan is approved, it may pave the way for other corporations facing large-scale lawsuits to use bankruptcy as a strategy to limit payouts and legal exposure.

The stakes for plaintiffs and J&J

The hearing will feature testimony from legal and financial experts, as well as attorneys representing both supporters and opponents of the settlement. While J&J insists that bankruptcy provides a faster and fairer resolution, critics warn that approving the plan would allow a multibillion-dollar corporation to evade full accountability.

The case is closely watched not only by the plaintiffs but also by the broader legal and business communities, as it could influence future corporate liability cases. If Judge Lopez rejects the bankruptcy plan, J&J could face years of litigation with potentially massive verdicts against it. Conversely, if the plan is approved, it could set a precedent for companies to resolve mass litigation through bankruptcy, even when they have the financial means to pay settlements outside of court.

As the legal battle unfolds, thousands of claimants and their families await a decision that could determine their financial compensation and J&J’s ability to move past one of the most significant legal challenges in its history.