(Bloomberg) -- Johnson & Johnson must face new lawsuits accusing the company of selling tainted baby powder that caused cancer, a judge ruled, opening the company up to court actions that had been halted for 19 months.
US Bankruptcy Judge Michael Kaplan said Thursday the company won't have to go to trial over any talc lawsuits for at least 60 days, but new lawsuits can be filed. Kaplan also said lawyers suing on behalf of tens of thousands of people can begin preparing their cases for the first time since late 2021. The limited pause is in trials is designed to give J&J's bankrupt unit, LTL Management, time to try to win court approval of an $8.9 billion settlement.
Kaplan's pause is narrower than the one sought by J&J. Lawyers for J&J's bankrupt unit tried to convince Kaplan to block all the baby powder lawsuits from going forward, just as he did after J&J first put the company into bankruptcy in 2021. That bankruptcy was dismissed earlier this month.
Kaplan said he is “skeptical” of J&J's effort to revive its strategy with a second bankruptcy case. The judge will likely have to decide whether to throw out the new bankruptcy case as well, should victim lawyers who reject the settlement make that request as expected.
“I have more questions than answers,” for now, Kaplan told both sides at a hearing held by Zoom Thursday.
Kaplan's ruling is “a win for claimants, who are now one step closer to being able to vote for themselves on whether to accept” the proposed settlement, a spokesperson for J&J said in an emailed statement.
Earlier Arguments
Earlier this week, LTL was in court in New Jersey to argue about whether the lawsuits should restart, or remain on hold while J&J tries for the second time to use the bankrupt unit to persuade cancer victims to accept the settlement. Critics say they would rather take their claims to juries around the country to try to win verdicts against J&J.
Lawsuits against bankrupt companies are automatically paused while a plan to repay creditors — including people who have filed lawsuits — is hashed out. LTL argued that it cannot resolve the lawsuits as part of the bankruptcy case while J&J is fighting the tens of thousands of case around the country.
J&J has long denied any link between cancer and baby powder and argues that the best way to settle the lawsuits is through a negotiated plan blessed by a bankruptcy court.
Victims allege that for decades J&J sold baby powder that contained talc contaminated with the toxic substance asbestos. Although J&J has prevailed in some cases, it has lost nearly a dozen suits over the years. One case was that went all the way to the US Supreme Court resulted in J&J being forced to pay $2.5 billion to a group of about 20 women.
The new settlement proposal is backed by as many as 80,000 claimants, company lawyer Gregory Gordon told Kaplan in federal court on Tuesday. The proposal has split the law firms representing tens of thousands of women who say say the company's baby powder gave them cancer. Holdouts have questioned the number of claimants supporting law firms say they represent and claim J&J wrongly put LTL Management back into bankruptcy just hours after its first effort was dismissed on orders from a federal appeals court.
Eventually, LTL will need to send its proposal to claimants for a vote. Should 75% of those voting back the deal, LTL would set up a trust funded with the $8.9 billion from J&J. All current and future lawsuits would then be channeled to the trust, which would use a complex set of rules to decide how much each claimant would get.
J&J said Tuesday it incurred a $6.9 billion charge attributable to the proposed talc settlement, contributing to a $68 million loss for the first quarter of 2023.
The company has said it needs Chapter 11 to resolve the talc liability, which continues to grow. John Kim, LTL's chief legal officer, testified Tuesday the the number of pending talc claims doubled between the time the second bankruptcy was filed in April and the J&J subsidiary first filed Chapter 11 in October 2021.
“The talc liability is enormous,” Kim said.
The new bankruptcy filing is LTL Management LLC, 23-12825, U.S. Bankruptcy Court for the District of New Jersey (Trenton).
(Updates with details beginning in the first paragraph.)
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