Johnson & Johnson tries bankruptcy a third time for talc liabilities
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Johnson & Johnson baby powder. Photo: Justin Sullivan/Getty Images
Johnson & Johnson on Friday took a third swing at using bankruptcy court to shed the talc liabilities that have troubled the company for years.
Why it matters: Two previous attempts to place a specially created subsidiary into Chapter 11 protection failed after courts ruled the parent company wasn't broke and therefore couldn't use bankruptcy to its advantage.
Driving the news: J&J subsidiary Red River Talc LLC filed for Chapter 11 in a proposed settlement covering tens of thousands of cases in which victims say talc in the company's baby powder caused their ovarian cancer.
- Under the settlement, J&J will contribute $8.9 billion over 25 years — and it has the support of 83% of current claimants that voted on it. The original offer was $2 billion.
- It "constitutes one of the largest settlements ever reached in a mass tort bankruptcy case," J&J said in a statement, adding that alleged victims would get "a far better recovery than they stand to recover at trial."
- The company has since discontinued its baby powder but maintains that it was safe.
The big picture: Experts call the court maneuver a "Texas two-step," a controversial process in which the parent company places certain liabilities in a separate legal entity, and then ditches them in bankruptcy.
Zoom in: "Most law firms with talc cases have recommended that claimants support the plan and worked to secure votes in its favor," WSJ reported. However, a "handful of firms led by Beasley Allen are vehemently opposed to the offer and have urged other plaintiffs' lawyers not to support it."
The bottom line: Most people who say J&J's baby powder caused their ovarian cancer will get between $75,000 and $150,000, WSJ reported.
- Cases involving mesothelioma are being dealt with outside of bankruptcy.
