What Exactly Is Johnson & Johnson’s $8.9 Billion Dollar “Settlement Offer”?

Johnson & Johnson's Files for a 2nd Bankruptcy in the Often Confusing Litigation

May 04, 2023 - Did Johnson & Johnson Really Just Offer a Settlement for Baby Powder Cases? You may have heard that Johnson & Johnson agreed to pay $8.9 billion dollars to settle tens of thousands of baby powder ovarian cancer lawsuits. While Johnson & Johnson originally offered $2 billion dollars to settle this litigation, this much larger settlement offer may come with particular conditions and restrictions. In fact, the offer in question was only just made in early April, and as of now, it is simply too early to determine whether the new offer is favorable for claimants or not. The Johnson & Johnson baby powder ovarian cancer litigation has been ongoing for more than 16 years, beginning with individual cases being filed as far back as 2007. A baby powder ovarian cancer multi-district litigation was formed in 2015 to consolidate all claims into one national venue, and then in 2021, the pharmaceutical giant filed for what is sometimes known as a “Texas Two-Step” bankruptcy.

A “Texas Two-Step” bankruptcy involves creating a new entity (in this case, LTL Management Holdings), and then funding that entity with a certain amount of assets. [LTL was originally funded with only $2 billion dollars.] What makes this process questionable to some is that all baby powder liabilities were also placed into LTL Management Holdings, including the ovarian cancer cases originally filed in the New Jersey MDL (MDL #2738). Critics of the “Texas Two-Step” form of bankruptcy assert the tactic allows companies to hide from their financial and legal obligations.

Johnson & Johnson’s first petition was filed in U.S. Bankruptcy Court in North Carolina, and then transferred to Federal Bankruptcy court in New Jersey. The bankruptcy was challenged multiple times for 18 months, and even included an analysis of the prospective values of all claims by well-known 9/11 case valuator, Kenneth Feinberg. Eventually, the bankruptcy was rebuked and dismissed by the 3rd Circuit Court of Appeals. The court stated that since the parent company of LTL (Johnson & Johnson) was not itself in financial distress, this type of bankruptcy could not be utilized.

In an unprecedented move, within minutes of the first dismissal and in seeming disregard for the 3rd Circuit ruling, Johnson & Johnson’s attorneys took action to file a second bankruptcy for LTL Management Holdings on April 05th of this year. LTL reportedly plans to present a reorganization plan that contains a proposed settlement that would effectively settle some 60,000 baby powder talc cases. The much larger settlement offer (from $2 billion to $8.9 billion) was approved by J & J’s board, even though Johnson & Johnson continues to assert that its talc products are safe and do not cause cancer. Currently, the New Jersey MDL remains frozen with Statutes of Limitation “stayed” until the middle of June. What looms now is a debate over the terms of the proposed settlement and determination of what it exactly entails, with more hearings scheduled in May of this year. Plaintiffs’ Attorneys who oppose the settlement will likely look to appeal the case back to the same court that rejected the first bankruptcy filing.

What Do We Know So Far, and How Would the Newly Proposed “Settlement” Work? The newly proposed settlement would supposedly allow plaintiffs diagnosed with cancer prior to April 1st to be paid from a bankruptcy trust within one year of the judge’s approval of the proposed Chapter 11 plan. For plaintiffs diagnosed after April 1st, there would presumably be money set aside in the trust for a period of twenty-five years. There are also potential provisions allowing for compensation for a broader range of gynecological cancers, but the details as to what injuries qualify for payment and for how much are still unclear. Finally, portions of the proposed trust are specifically carved out for Talc-related Mesothelioma and for State Attorney General claims. Attorneys opposing the proposed settlement “mechanism” argue that it leaves each talc claimant grossly undercompensated for medical costs, lost wages, and pain & suffering. Johnson & Johnson and LTL argue that the bankruptcy and settlement will serve a greater good for all parties involved, delivering settlement payouts more efficiently and equitably. For plaintiffs, it is important that they understand this is essentially a second bankruptcy with a proposed settlement mechanism contained in the filing.

This proposal is complex, making it extremely difficult to determine what each talc claimant can expect to receive. The proposed settlement, if it survives, would still require approval from 75% of the claimants. As noted, it is not yet possible to know exactly what kind of settlement award individual claimants would receive from this proposed funding amount. Depending on how many total claimants are involved, and what other liabilities the fund will be bound by, individual claimants could receive a very good settlement amount—or a settlement amount that does not even begin to cover expenses related to the talc injuries.

Does Johnson & Johnson Have the Votes to Approve the Settlement Mechanism? At the time the second bankruptcy was filed by Johnson & Johnson subsidiary LTL, the company noted it had tentatively secured the approval from many law firms currently representing thousands of baby powder talc claimants (estimated from 40,000 to 70,000 claimants). This assertion may be premature, however, since the actual claimant’s approval is not absolute. Clients may be hesitant to sign off on the proposed settlement because they do not yet have an actual dollar figure proposal.

Furthermore, while some law firms may have had their J & J baby powder ovarian cancer clients provide a specific power of attorney authorizations during the first bankruptcy that allows their law firm to act on their behalf for any settlement proposal, this is not true for all firms. And even when there is a power of attorney authorization in place, this presents a quandary for attorneys who would essentially be asked to accept a settlement offer on behalf of their clients without a specific settlement amount for individual cases.  

Sullo & Sullo Remains Committed to Our Clients - As you can guess, there are more questions than answers at this point. Our firm is one hundred percent committed to staying apprised of all developments in this proposed settlement/bankruptcy while focusing on what’s best for our clients. The second bankruptcy filing was not dismissed by Judge Kaplan on April 11, 2023, so for the time being, it will remain in court and proceed. The MDL “stay” also remains in place, halting case filings, discovery requests and answers, and other baby powder-related MDL issues until further notice.

Sullo & Sullo will stay apprised of any new developments in this case. We are poised to act in the best interests of our clients as always. We refuse to paint a false picture regarding what is going on with this J & J proposed settlement, since at this juncture it is simply not clear whether this proposed baby powder talc settlement is good or bad for the plaintiffs involved.

Until more detailed and concrete information comes to light it’s simply impossible to know how this settlement offer could affect baby powder ovarian cancer plaintiffs who were harmed by Johnson & Johnson’s baby powder product and its failure to warn prospective consumers of the dangers it posed. Sullo & Sullo will continue providing truthful, concise information to our clients in the days ahead, always with the best interests of our clients uppermost in our minds. If you have further questions, contact one of our experienced Sullo & Sullo lawyers today.

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