By Dietrich Knauth
(Reuters) – Johnson & Johnson’s proposed settlement of $8.9 billion in thousands of lawsuits alleging its talc products cause cancer faces a crucial hurdle this week as a U.S. bankruptcy judge in New Jersey is considering whether or not a J&J subsidiary can resolve them by filing for bankruptcy a second time.
J&J subsidiary LTL Management’s first attempt was rejected in April after a US appeals court ruled it was not in sufficient financial difficulty to qualify for bankruptcy protection.
LTL soon filed for bankruptcy again, arguing that its second effort has won more support from plaintiffs for a comprehensive settlement of pending and future lawsuits alleging J&J’s baby powder and other baby powder products. talc sometimes contained asbestos and caused mesothelioma, ovarian cancer and other cancers. J&J has stated that its talc products are safe and do not contain asbestos.
Lawyers representing cancer victims, as well as the US Department of Justice’s bankruptcy watchdog, have called for LTL’s second bankruptcy to be dismissed as an abuse of US bankruptcy law. Cancer victims who oppose the bankruptcy settlement say the second bankruptcy recycles a failed legal strategy to keep their cases from being heard by juries.
Starting Tuesday, US Bankruptcy Judge Michael Kaplan in Trenton must hear days of evidence and argument before issuing a decision. Kaplan, whose ruling supporting LTL’s first filing for bankruptcy was overturned by the Philadelphia-based 3rd United States Court of Appeals, said he plans to rule on whether to dismiss the second bankruptcy of LTL in early August.
LTL executives, including chief legal officer John Kim, are expected to testify on Tuesday. Jim Murdica, an attorney who participated in the $8.9 billion settlement negotiations on behalf of LTL and J&J, and Mikal Watts, an attorney for some plaintiffs, are scheduled to testify on Wednesday.
Erik Haas, J&J’s global vice president for litigation, said in a statement last week that the proposed bankruptcy settlement offers a fairer and faster resolution for cancer claimants than litigation in other courts. .
Lawyers opposing J&J’s settlement offer argue J&J created the ‘illusion’ of support by signing deals with plaintiffs’ attorneys like Watts, who quickly signed large numbers of clients without ever suing of lawsuits against J&J.
LTL’s bankruptcy proceedings stayed all 38,000 lawsuits filed before October 2021. Kaplan ruled that the second bankruptcy did not completely end talc litigation, leaving one plaintiff’s case to go to trial and allowing the filing new lawsuits against LTL and J&J as long as no further lawsuits are scheduled without bankruptcy court leave.
US bankruptcy law generally protects debtors from lawsuits while they reorganize in the event of bankruptcy. Bankruptcy judges have not always extended these protections to non-bankrupt parent companies like J&J.
(Reporting by Dietrich Knauth in New York; Editing by Alexia Garamfalvi and Will Dunham)