J&J Gains 75% Support for $6.5B Talc Settlement

Johnson & Johnson (J&J) has reportedly secured over 75% support from claimants for its proposed $6.5 billion settlement of talc-related lawsuits, according to Bloomberg. This threshold was set by the company as a prerequisite for its third attempt to resolve the litigation through bankruptcy protection.

The healthcare giant faces approximately 61,000 lawsuits alleging that its talc products, including baby powder, were contaminated with asbestos and caused various cancers. J&J denies these claims and maintains that its products are safe.

The company is pursuing a "Texas two-step" bankruptcy strategy, which involves creating a subsidiary to absorb talc liabilities and then declaring Chapter 11 bankruptcy. This approach aims to force all plaintiffs into a single settlement without J&J itself filing for bankruptcy. Two previous attempts were blocked by federal courts.

The current proposal requires 75% approval from claimants before the subsidiary can request a bankruptcy judge to impose the deal on all plaintiffs. This percentage matches a provision in U.S. bankruptcy law. Bankruptcy judges have the power to enforce global settlements that permanently halt related lawsuits and prevent new ones.

Despite reaching the voting threshold, J&J's strategy still faces legal challenges. The recent Supreme Court ruling in the Purdue Pharma case has narrowed courts' ability to stop lawsuits against non-bankrupt entities without plaintiffs' consent. However, J&J argues that this ruling does not affect its proposal due to specific legal protections for asbestos defendants in U.S. bankruptcy law.

Courts rejected J&J's earlier talc bankruptcies because the subsidiary was not in "financial distress," and the company must overcome similar arguments in this attempt.

The outcome of this case could have significant implications for corporate liability and bankruptcy law in the United States.