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Johnson & Johnson said it would continue fighting thousands of lawsuits that alleged its talc powder caused cancer, after a US judge on Monday rejected a third attempt to settle the class-action claims through the bankruptcy system.
“With the bankruptcy option now foreclosed, we will return to the tort system to defeat the meritless claims and deny plaintiffs’ counsel of any recovery,” Erik Hass, head of J&J’s litigation group, said on a Tuesday morning conference call with analysts.
The New Jersey-based company has spent years trying to devise a deal where it could use the US bankruptcy code to reach a binding final settlement with alleged talc powder victims while keeping the parent company, whose market cap is around $400bn, out of bankruptcy.
J&J shares fell by more than 4 per cent in pre-market trading on Tuesday. On the conference call, J&J chief executive officer Joaquin Duato reaffirmed its 2025 profit guidance despite the adverse ruling. The company also reversed a $7bn accounting reserve it had previously made in anticipation of approval of the bankruptcy settlement.
J&J packaged its talc liabilities in a subsidiary known as Red River Talc for its latest Chapter 11 filing. Red River entered bankruptcy with $9bn funded from the parent company to pay claimants, and the vast majority of plaintiffs had agreed to the terms.
But Judge Christopher López of US Bankruptcy Court in Houston rejected the deal on Monday, finding the 83 per cent support by claimants was not credible because of evidence that some lawyers may have improperly voted on behalf of victims. The bankruptcy court also found the settlement’s so-called third party releases — allowing some entities outside the bankruptcy case to avoid future lawsuits — were improper. The ruling followed a two-week evidentiary trial earlier this year.
The latest bankruptcy filing, like the previous two, was opposed by a group of dissident plaintiff law firms as well as the Office of the US Trustee, a Department of Justice unit which safeguards public interest in bankruptcy cases.
J&J has long maintained its talc was not carcinogenic and noted it has prevailed in 16 of 17 trials asserting ovarian cancer liability over the last 11 years.
“The plaintiffs bar had their opportunity to accept an unprecedented resolution. Instead, they squandered the moment, believing that we could be coerced into settling for egregiously large amounts outside of the bankruptcy system. They were and are sorely mistaken,” said Haas, the J&J lawyer.
J&J, with a market capitalisation of $400bn, has struggled to convince judges to allow it to resolve its talc liability through bankruptcy. In its original 2021 Chapter 11 filing, a federal appeals court eventually ruled J&J was too wealthy to utilise the bankruptcy process.
Judge López noted the dismissal of the latest bankruptcy petition could prove difficult for all parties. Alleged victims “may unfortunately continue to die while all of this gets sorted out,” he said.
