Johnson & Johnson has made a move to resolve its legal woes, following widespread lawsuits accusing its talc products of causing ovarian cancer and mesothelioma due to the alleged presence of asbestos.
The beauty and healthcare giant announced that its newly created and separate subsidiary, LTL Management, which was established to hold and manage claims in cosmetic talc litigation, has filed for voluntary Chapter 11 bankruptcy protection.
According to J&J, the filing is intended to resolve all claims related to cosmetic talc in a manner that is equitable to all parties, including any current or future claimants.
J&J has been rumoured to be considering offloading talc liabilities into bankruptcy since July this year, when a whistleblower leaked news of J&J’s attorneys’ having contacted the plaintiffs’ lawyers about the possible strategy.
"We are taking these actions to bring certainty to all parties involved in the cosmetic talc cases," said Michael Ullmann, Executive Vice President, General Counsel of Johnson & Johnson.
"While we continue to stand firmly behind the safety of our cosmetic talc products, we believe resolving this matter as quickly and efficiently as possible is in the best interests of the company and all stakeholders."
J&J says that to demonstrate its commitment to resolving the cosmetic talc cases and remove any financial objections to the process, it has agreed to provide funding to LTL for the payment of amounts the Bankruptcy Court determines are owed by LTL and will also establish a US$2bn trust for this purpose.
Additionally, LTL has been allocated certain royalty revenue streams with a present value of over $350m to further contribute to potential costs.
John Kim, Chief Legal Officer of LTL, said: "With the financial backing of Johnson & Johnson, coupled with a dedicated trust and significant financial resources supporting LTL, we are confident all parties will be treated equitably during this process."
According to Reuters, the legal manoeuvre deployed by J&J is called a Texas two-step bankruptcy and has been used by other companies facing asbestos litigation.
It involves a business being split in two via a so-called divisional merger under Texas law, with the transaction creating a new entity saddled with the talc liabilities.
J&J is currently faced with more than 34,000 cancer lawsuits.
A September 2021 statement from the Beasley Allen Law Firm, declared that J&J’s Texas two-step move would limit compensation for victims “to pennies on the dollar [US slang for 'much cheaper than it cost originally'] and could bring an indefinite halt to all related trials scheduled in state courts across the nation”.
J&J has confirmed that all cosmetic talc cases will be stayed pending the outcome of the Chapter 11 proceedings.
The New Brunswick, New Jersey-based giant noted that its actions are “not a concession of liability, but rather a means to achieve an equitable and efficient resolution of the claims raised in the cosmetic talc litigation”.
The company observes that it has won the majority of cosmetic talc-related jury trials that have been litigated to date and continues to believe that none of the talc-related claims against it have merit, as they are premised on the allegation that cosmetic talc causes ovarian cancer and mesothelioma, a position that J&J notes has been rejected by independent experts.
In September, a Philadelphia state jury ruled J&J’s talc products had not contributed to Ellen Kleiner’s ovarian cancer diagnosis, while, in August, jurors in Illinois also refused to hold J&J liable for a similar case in which the family of Elizabeth Driscoll, who died of ovarian cancer in 2016, had been seeking up to $50m in damages.
Big payouts made by the brand owner have included a $4bn fine to 22 women by a St Louis court in 2018 and $750m to four complainants by a New Jersey jury.