A subsidiary of Johnson & Johnson has filed for bankruptcy for the third time to settle tens of thousands of lawsuits alleging that its baby powder and other talc products cause cancer.
Red River Talc LLC Submitted Red River filed for voluntary Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas to end all present and future claims related to ovarian cancer caused by its products. In its latest settlement, Red River agreed to pay $8 billion over 25 years to plaintiffs, $1.75 billion more than its previous proposal.
The health care giant faces roughly 61,000 lawsuits alleging that its baby powder and other talc products are contaminated with asbestos and cause ovarian and other cancers. J&J maintains that its products do not cause cancer or contain asbestos.
“The overwhelming support for this plan demonstrates the company's extensive and good faith efforts to resolve this litigation for the benefit of all stakeholders,” said Eric Haas, J&J's worldwide vice president for litigation. “The plan is fair and just for all parties and therefore should be approved promptly by the bankruptcy court.”
J&J declined to comment. press release.
The subsidiary said it filed for bankruptcy because its proposed plan was supported by 83 percent of current bankruptcy filers, exceeding the 75 percent approval threshold set by U.S. bankruptcy code.
Red River agreed to contribute an additional $1.1 billion to the bankruptcy trustee for distribution to plaintiffs, and J&J backed up its commitments and agreed to contribute an additional $650 million to settle claims for legal fees sought by plaintiffs' lawyers.
J&J said in its notice that the plan “would result in significantly greater compensation for plaintiffs than would be available at trial.”
But the company's so-called “Texas Two-Step” bankruptcy strategy still faces hurdles. In J&J's case, the company is trying to roll over its talc liabilities to a newly formed subsidiary that has declared Chapter 11 bankruptcy protection, which would allow J&J to avoid filing for bankruptcy.
A bill the senators introduced in July aims to block wealthy companies from using this particular tactic.
Reuters contributed to this report.
