Despite being thrown off its rhythm twice already, Johnson & Johnson is making another go of its “Texas two-step” strategy to wash its hands of tens of thousands of lawsuits claiming the company’s talc products caused users to develop cancer.
The latest effort is being driven by J&J subsidiary Red River Talc, which on Friday announced that it filed a Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Southern District of Texas.
As part of the offer, Red River has boosted its settlement contribution by $1.75 billion to $8 billion. The funds are expected to be paid out to claimants over 25 years should the bankruptcy maneuver go through. The total bankruptcy offer will end up being valued at around $10 billion when accounting for inflation over time.
J&J argues that if the plan goes through, it will “fully and finally resolve” current and future claims specifically tied to allegations that its cosmetic talc products caused patients’ ovarian cancer.
All told, J&J is currently staring down some 62,000 personal injury lawsuits alleging cancer ties to its talc products, including the company’s highly popular baby powder. The company continues to argue that the cases against its talc products are without merit.
Red River filed its bankruptcy case after mustering up the support of 83% of current claimants—a figure that “far exceeds” the 75% approval threshold set by the U.S. Bankruptcy Code to confirm the plan, J&J explained in a release.
Aside from current claimants, Red River’s bankruptcy tactic has also won the blessing of a future claims representative who would oversee future talc lawsuits against J&J.
J&J’s formal reveal of the Red River plan confirms a Reuters report from earlier this month that J&J was inching closer to winning the support needed to pull off its Texas two-step strategy.
Under the strategy—which has been employed by other companies to resolve class-action lawsuits—J&J has set up subsidiaries to handle its talc claims before those subsidiaries sought bankruptcy protections. The controversial bankruptcy technique is designed to pool plaintiffs into a single settlement while protecting J&J itself from a bankruptcy filing.
While J&J did not confirm the settlement figure floated by Reuters in early September, the company told Fierce Pharma at the time that it had swayed Allen Smith of the Mississippi-based Smith Law Firm to support the bankruptcy plan. Smith, who had been a holdout, jumped on board to recommend the plan to his 12,000 clients, the company explained.
“The opposition to this plan has no meaningful alternative proposal for getting their claimants a better recovery on any sort of realistic timeline, and therefore, any opposition should cease,” Smith said in a statement at the time.
The plan remains controversial, with Andy Birchfield—an attorney opposed to the deal—telling Reuters last week that he viewed the vote as “another fraudulent effort by J&J to manipulate the bankruptcy process and minimize the legitimate claims of ovarian cancer victims.”
The latest bid marks J&J’s third attempt to Texas two-step its way around the many talc claims it faces.
J&J first put the legal maneuver into motion in 2021 by leveraging a separate subsidiary called LTL Management. LTL’s bankruptcy bid was shot down twice by a federal appeals court, once in January 2023 and again in July.
J&J specifically asked plaintiffs to vote on its latest bankruptcy plan in a bid to sweeten its chances of success on the third attempt.
J&J contends the bankruptcy deal is in the best interest of cancer claimants, who it says are unlikely to “recover anything at trial” and may never get “their day in court.”
“The overwhelming support for the Plan demonstrates the company’s extensive, good-faith efforts to resolve this litigation for the benefit of all stakeholders,” Erik Haas, J&J’s global VP of litigation, said in a statement. “This plan is fair and equitable to all parties and, therefore, should be expeditiously confirmed by the bankruptcy court.”
While J&J has long defended its talc-based products, the company has removed them from the market in recent years—first in North America in 2020 and then the rest of the world in 2023. The drugmaker now sells a cornstarch-based version of its baby powder.