US judge suspends Johnson & Johnson baby powder lawsuits – 04/20/2023 – Market

A US judge on Thursday suspended most of the tens of thousands of lawsuits accusing Johnson & Johnson’s JNJ.N baby powder and other baby powder products of causing cancer, as well as halting all judgments, as part of the second attempt by a subsidiary of the company to resolve cases by settlement in a bankruptcy proceeding.

US Bankruptcy Judge Michael Kaplan temporarily suspended most litigation during a hearing in Trenton, New Jersey. The decision generally meets a request by J&J to freeze cases as the company tries to reach a permanent settlement with current accusers, which would also set aside money for future lawsuits.

J&J says it has broad support for a proposed settlement worth $8.9 billion, a claim disputed by lawyers representing plaintiffs against the company.

LTL Management, a subsidiary of J&J, filed for bankruptcy a second time earlier this month to help finalize the latest deal, despite a federal appeals court’s decision in January to dismiss its first bankruptcy filing based on fact that the J&J subsidiary is not in financial difficulty.

“I have more questions than answers,” Kaplan said during Thursday’s court hearing, referring to arguments presented to him about the second bankruptcy case earlier this week.

The judge stayed about 38,000 talc cases filed in a federal district court in New Jersey, and allowed other cases to proceed until the trials began.

Kaplan said he would speak again at the end of May.

Erik Haas, J&J’s vice president of worldwide litigation, in a statement calling the decision “a win for the plaintiffs,” expressed confidence that the proposed settlement would ultimately pass.

LTL management argued that allowing litigation against J&J to continue would jeopardize ongoing litigation efforts. J&J previously used a complex legal maneuver dubbed the “Texas two-step” to shift responsibility for legal proceedings to LTL.

Leigh O’Dell, one of the lead attorneys for plaintiffs in consolidated cases in federal court in New Jersey, said banning trials limits pressure on J&J.

“We continue to believe that this bankruptcy filing is illegitimate and that this position will be affirmed through the appeals process,” Leigh O’Dell said in a statement.

The ruling has left in legal limbo consumers who accuse J&J’s baby powder of giving them ovarian cancer and mesothelioma. Some plaintiffs allege that the asbestos in the talc caused them to become ill. So far, none of them have been able to present their indictment and to a jury.

J&J has stated that its baby powder is safe, asbestos-free and does not cause cancer.

The healthcare conglomerate has not filed for bankruptcy. In October 2021, J&J split its consumer business into two parts and offloaded the talc processes into a newly created subsidiary, LTL, which then declared bankruptcy.

In January, the 3rd US Court of Appeals in Philadelphia overturned LTL’s bankruptcy filing. Kaplan dismissed the bankruptcy earlier this month, but the company re-filed the application in its courtroom two hours later.

‘Tough battle’

The talc plaintiffs who oppose J&J’s proposed settlement plan plan to file a motion to dismiss the second bankruptcy filing, one of their lawyers said in court Tuesday.

They portray J&J’s actions as an abuse of the bankruptcy system by a multinational conglomerate valued at more than $400 billion that is in no great danger of running out of money to pay cancer victims.

A US Department of Justice official tasked with following the case also rejected the second bankruptcy filing.

“Without a doubt, the debtor has an uphill battle,” Kaplan said, referring to the LTL deal and prospects for the reorganization.

J&J and its subsidiary have argued that bankruptcy would distribute settlement payments more fairly, efficiently and equitably than the “lottery” offered by trial courts, where some litigants receive large prizes and others nothing.

Jim Murdica, an attorney tasked with settling talc cases for J&J, testified in a deposition this past weekend that some 80,000 claimants support the company’s settlement offer – enough to meet a bankruptcy threshold that the settlement requires. 75% of all applicants, he said.

Lawyers representing plaintiffs opposing the settlement say these numbers mostly reflect unfiled claims and that the people behind those claims have not yet agreed to the settlement. J&J and LTL argue that their settlement process is typical.

LTL terminated a financing agreement with its parent that the appeals court found insulated it from the financial distress necessary to legitimately declare bankruptcy.

The company’s lawyers now argue that the new financing deals leave LTL’s management in financial difficulties. At the same time, they claim that the settlements provide sufficient funds to pay the plaintiffs and avoid rendering LTL insolvent, countering the plaintiffs’ lawyers’ arguments that the transactions were fraudulent.

Translated by Paulo Migliacci