DOJ Blocks Johnson & Johnson's Third Talc Bankruptcy Bid Despite Growing Support

Texas Bankruptcy Strategy Faces Federal Scrutiny

The Department of Justice has launched a decisive challenge against Johnson & Johnson’s latest attempt to resolve thousands of talc-related lawsuits through bankruptcy proceedings in Texas. This third bankruptcy effort, orchestrated through J&J’s newly created subsidiary Red River Talc LLC, comes with an enhanced $8 billion settlement offer and unprecedented support from 83% of claimants. The federal intervention arrives at a critical moment when the healthcare giant appeared to be nearing a resolution for the 60,000-plus cases alleging cancer links to its talc products. The DOJ’s U.S. Trustee program, responsible for overseeing bankruptcy cases, has characterized J&J’s strategy as “a textbook example of bad faith” in its court filing. This development marks a significant setback for J&J’s years-long effort to resolve the mounting litigation through bankruptcy channels.

5 Key Points

• DOJ calls J&J’s bankruptcy strategy “a textbook example of bad faith.”
• The company offered a settlement of $8 billion over 25 years.
• 83% of talc plaintiffs support current settlement terms.
• Over 60,000 lawsuits are pending resolution.
• The recent $15 million verdict adds pressure to settlement efforts.

Red River Subsidiary Strategy Under Federal Fire

The U.S. Trustee’s challenge centers on fundamental questions about the legitimacy of J&J’s bankruptcy strategy through its Red River Talc LLC subsidiary. The Justice Department maintains that this newly created entity “has no need for bankruptcy relief,” highlighting concerns about the manipulation of bankruptcy procedures by financially healthy corporations. The filing directly parallels J&J’s previous failed attempts in New Jersey, where courts dismissed similar cases due to the lack of genuine financial distress. The DOJ’s intervention specifically challenges the corporate restructuring strategy known as the “Texas two-step,” which J&J first attempted in 2021. This latest motion gives J&J a 21-day window to defend its bankruptcy strategy and explain why the court should reject the DOJ’s dismissal request.

Multi-Billion Settlement Package Draws Majority Support

Johnson & Johnson’s recent enhancement of its settlement offer to $8 billion, payable over 25 years, represents a significant increase from its previous proposals. The company strategically added $1.75 billion to secure broader support among claimants, successfully achieving approval from 83% of talc plaintiffs. This level of support notably exceeds the 75% threshold required by the U.S. Bankruptcy Code, positioning the company favorably from a procedural standpoint. The expanded settlement package aims to address decades of litigation while providing a structured framework for compensation to affected individuals. According to J&J’s chief financial officer Joseph Wolk, the settlement approach becomes particularly crucial given that traditional litigation would require “2,500 years to adjudicate in the courts.”

Supreme Court Precedent Shadows Bankruptcy Bid

The DOJ’s opposition draws significant strength from a recent Supreme Court decision regarding Purdue Pharma’s similar bankruptcy strategy. The comparison between J&J’s current attempt and Purdue’s rejected $10 billion opioid settlement plan raises serious questions about the viability of such corporate bankruptcy strategies. The federal court’s previous rejections in New Jersey have established a pattern of skepticism toward bankruptcy filings by financially stable companies seeking to resolve mass tort litigation. This legal precedent and the Supreme Court’s stance create a challenging environment for J&J’s latest bankruptcy initiative. The evolving legal landscape suggests increasing scrutiny of corporate attempts to use bankruptcy to manage product liability claims.

Mounting Verdicts Push Settlement Urgency

Recent court decisions have intensified the pressure on Johnson & Johnson to find a comprehensive resolution to its talc litigation. A Connecticut court’s recent $15 million verdict, plus pending punitive damages, demonstrates the ongoing financial risks of continued litigation. The company’s historical success in defending most talc cases at trial has been offset by occasional significant losses, creating uncertainty in its legal strategy. These developments have influenced J&J’s aggressive pursuit of a bankruptcy settlement despite maintaining its products’ safety. The mounting legal pressure has prompted significant changes in J&J’s business strategy, including the global discontinuation of talc-based products in favor of cornstarch alternatives.