On April 4, 2023, Johnson & Johnson announced that it has earmarked $8.9 billion as part of a plan to cover settlements to tens of thousands of plaintiffs who allege the company's talcum powder products caused cancer. This amount is more than four times the $2 billion the company had originally set aside in October 2021.
The revised talc settlement amount is part of a proposed reorganization plan to resolve both current and future claims relating to the company's talc-based products. The finalization of the plan rests on two conditions. First, the Court must accept the settlement as well as a bankruptcy refiling by a J&J subsidiary, LTL Management. Second, the settlement must have the approval of at least 75% of the claimants, as specified in section 524(g) of the U.S. Bankruptcy Code.
According to Mikal Watts, one of the lawyers for the plaintiffs, enough claimants now support the revised talc settlement to induce the Court's approval.
If the deal goes through, plaintiffs diagnosed with cancer before April 1, 2023, would receive their settlement amounts within a year, while payouts to future plaintiffs would be payable over the next 25 years.
LTL Management and the Texas two-step
In October 2021, J&J created LTL Management in an attempt to reduce its legal exposure in a maneuver known as a Texas two-step, where a solvent company transfers its tort liabilities to a newly created corporate entity that subsequently declares bankruptcy.
After LTL Management filed for a Chapter 11 bankruptcy two days after its formation, plaintiffs' lawyers challenged the effort as an abuse of the bankruptcy system. They argued the filing was not in good faith, as J&J's capitalization of more than $400 billion did not indicate insolvency, a necessity for establishing a bankruptcy claim. In response, J&J claimed the bankruptcy filing would be a more equitable resolution because it would help to ensure fairer settlement payouts.
In January 2023, a U.S. Court of Appeals dismissed the bankruptcy filing on grounds of illegitimacy. The Court's rejection of J&J's maneuver effectively prompted the company to revise its settlement proposal.
Potential health concerns surrounding talc products
Talc is a naturally occurring mineral and an ingredient in baby powder, a product closely associated with J&J. Though talc itself is harmless, it commonly occurs in the earth in close proximity to asbestos, a cancer-causing agent. Because of the proximity, asbestos can be in talc products. If applied to the genital region or inhaled, contaminated talc could potentially cause ovarian cancer or mesothelioma.
Concerns about potential asbestos contamination in talc have existed since the 1970s, and the claimants in the J&J talcum powder lawsuit allege the company has known about the connection for decades.
In October 2019, the U.S. Food and Drug Administration (FDA) completed a study in which it detected traces of asbestos in several talc products and worked with manufacturers, including J&J, to issue recalls.
J&J ceased sales of its talc-based baby powder in the North American market in 2020 and discontinued it worldwide in 2023. The company attributes its decision to "misinformation" surrounding the product and maintains that its talc-containing offerings are safe to use.