Johnson Second Bankruptcy Bid: Denied by US Judge Implications for $8.9 Billion Lawsuit Prevention Agreement

Johnson Second Bankruptcy Bid: Last Friday, Johnson & Johnson’s second bid for bankruptcy to resolve numerous talc cases faced a setback as a US judge turned down the request. This decision could have significant implications on an $8.9 billion lawsuit-prevention agreement.

Trenton, New Jersey’s U.S. Bankruptcy Judge Michael Kaplan denied J&J’s second bankruptcy plea, stating that talc-related claims did not lead to financial distress.

Kaplan explained, “The Court can detect the scent of smoke, but cannot visually perceive the presence of fire. LTL cannot use Chapter 11 since they are in financial trouble and want to be sure.”

In response, J&J expressed their intention to review Kaplan’s ruling and vehemently disputed the allegations, deeming them speculative and lacking scientific basis.

The legal battle began in 2021 when J&J sued LTL Management over talc debts, ultimately forcing LTL to shut down. In April, a US judge invalidated LTL’s first bankruptcy attempt, citing the absence of significant financial issues.

LTL, however, argued that their second bankruptcy filing received greater support from creditors. The cases against J&J allege that asbestos in their baby powder and other talc products caused mesothelioma, ovarian cancer, and other forms of cancer, while J&J maintains that their talc is asbestos-free.

The second bankruptcy petition by LTL was deemed in violation of U.S. law, leading attorneys and the Justice Department’s bankruptcy investigator to recommend its dismissal.

Johnson Second Bankruptcy Bid

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Andy Birchfield, a staunch advocate for cancer patients, claimed that the second bankruptcy move was an attempt to evade talc cases being heard in court. He criticized J&J for attempting to portray a $500 billion firm as bankrupt, urging them to take responsibility instead.

J&J argued that the expected bankruptcy arrangement is a more straightforward solution compared to facing cancer-related lawsuits. The company likened previous court battles to a lottery, with some claimants receiving significant payouts while others lost. So far, talcum powder-related decisions, settlements, and court costs have amounted to $4.5 billion.

Opponents of the $8.9 billion settlement offer raised concerns that J&J had struck deals with other lawyers to create the appearance of substantial support. These lawyers reportedly quickly gathered numerous clients without charging J&J.

Critics fear that J&J’s payment of claims during bankruptcy could compel cancer sufferers to accept compensation, potentially preventing future talc cancer victims from suing.

Prior to October 2021, LTL went bankrupt, putting 38,000 lawsuits on hold. Despite this, Kaplan proceeded with one case after LTL’s second bankruptcy. In that instance, a California man received $18.8 million in damages after suing J&J over their baby powder’s alleged connection to cancer.

Our Reader’s Queries

How much will the talcum powder lawsuit settle for in 2023?

In August 2023, the U.S. Bankruptcy Court turned down J&J’s second try to put its talc responsibilities into bankruptcy. Earlier, in April 2023, J&J made its second large public settlement offer of $8.9 billion to settle lawsuits related to talcum powder, as part of the bankruptcy process.

How much are people getting from Johnson and Johnson lawsuit?

Based on the examples above, it seems that the typical compensation for Johnson & Johnson baby powder cases is no less than $100,000. This is because some of the settlements were given to a group of people suing the company, so they will need to split the money among themselves.

What is happening with the talcum powder lawsuit?

On July 21, 2023, J&J put forward a plan to settle the talcum powder lawsuits on a global scale. The proposed total payout is a whopping $8.9 billion. Many talc plaintiffs and their legal representatives are in favor of this proposal, which is encouraging other plaintiffs to also agree to the settlement.

What is the bankruptcy strategy of Johnson and Johnson?

In 2021, J&J made a move to declare bankruptcy using a tricky legal tactic known as the “Texas Two-Step.” This involved two key steps. First, they set up a subsidiary company with insufficient funding and transferred their asbestos-related responsibilities to it. Then, the subsidiary declared bankruptcy, claiming it didn’t have enough money to fulfill its duties.

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