A subsidiary of Johnson & Johnson, Red River Talc LLC, has filed for Chapter 11 bankruptcy protection for the third time, aiming to settle thousands of lawsuits alleging that its talc-based products, such as baby powder, caused cancer.
The company submitted its filing in the US Bankruptcy Court for the Southern District of Texas as part of a prepackaged bankruptcy plan designed to resolve both current and future claims related to its talc products.
Under the proposed settlement, Red River Talc has agreed to pay $8 billion to claimants over the next 25 years, which is $1.75 billion more than its previous settlement offer. The revised proposal has garnered the support of 83% of claimants, surpassing the 75% approval threshold required under US bankruptcy law.
Johnson & Johnson, which has faced around 61,000 lawsuits claiming that its talc products were contaminated with asbestos and linked to ovarian and other cancers, continues to maintain that its products are safe and free of asbestos.
“This plan is fair and equitable to all parties and, therefore, should be expeditiously confirmed by the Bankruptcy Court,” said Erik Haas, J&J’s worldwide vice president of litigation.
Despite the substantial backing from claimants, J&J’s strategy—often referred to as the “Texas two-step”—remains controversial. This legal tactic involves creating a subsidiary to assume liability for lawsuits and then filing for bankruptcy, protecting the parent company from having to declare bankruptcy itself. Critics argue that this maneuver is an abuse of the bankruptcy system.
A bill introduced in Congress in July 2023 seeks to prevent companies from using this specific strategy, which has drawn scrutiny after being used in other high-profile cases, including Purdue Pharma’s opioid litigation. J&J, however, contends that its approach will ensure better outcomes for claimants compared to protracted litigation.
Red River Talc has also committed an additional $1.1 billion to a trust fund designated for distribution to claimants, while J&J has agreed to contribute an extra $650 million to cover legal fees and other expenses. The company asserts that the settlement would provide claimants with a more favorable recovery than what they might obtain through individual trials.
Although many claimants have supported the settlement, legal challenges persist. Some creditors argue that J&J’s strategy violates Supreme Court precedent and distorts the purpose of bankruptcy protections. The case continues to play out in court, with opponents urging the judge to dismiss the filing.
FOX Business, New York Post, and Bloomberg contributed to this report.
