Red River Talc LLC Proposes $8 Billion Settlement Over 25 Years

Johnson & Johnson’s subsidiary, Red River Talc LLC, has filed for bankruptcy protection for the third time in an attempt to resolve thousands of lawsuits claiming its talc products caused cancer. This latest move is part of J&J’s ongoing efforts to address the massive litigation surrounding its baby powder and other talc-based products.

5 Key Points

  • Red River Talc LLC filed a voluntary prepackaged Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Southern District of Texas.
  • The new settlement proposal offers $8 billion to claimants over 25 years, an increase of $1.75 billion from the previous offer.
  • J&J faces approximately 61,000 lawsuits alleging its talc products caused ovarian and other cancers.
  • The proposed plan received support from 83% of current claimants, exceeding the 75% approval threshold required by the U.S. bankruptcy code.
  • J&J maintains that its products do not cause cancer or contain asbestos.

Third Time’s the Charm? Red River’s Bankruptcy Strategy

Red River Talc LLC, a Johnson & Johnson subsidiary, has once again turned to the bankruptcy courts in its ongoing effort to resolve many lawsuits. This third bankruptcy filing is specifically aimed at ending all current and future claims related to ovarian cancer allegedly caused by J&J’s talc products. The company’s strategy involves using a “Texas two-step” bankruptcy approach, where J&J creates a subsidiary to absorb the talc liabilities and then declares bankruptcy, allowing the parent company to avoid filing for bankruptcy itself. This tactic has faced criticism and legal challenges, with some lawmakers attempting to block its use by wealthy corporations.

Sweetening the Deal: Increased Settlement and Support

In this latest bankruptcy filing, Red River Talc LLC has proposed a settlement of $8 billion to be paid to claimants over 25 years. This represents a significant increase of $1.75 billion compared to their previous proposal. The company reports that this new plan has garnered support from 83% of current claimants, surpassing the 75% approval threshold required by the U.S. bankruptcy code. Red River has committed an additional $1.1 billion to the bankruptcy trust for distribution to claimants to sweeten the deal further. Additionally, J&J has agreed to contribute an extra $650 million to resolve claims for legal fees and expenses sought by plaintiffs’ counsel.

J&J’s Stance: Defending Products Amid Legal Storm

Throughout this legal battle, Johnson & Johnson has consistently maintained that its talc products do not cause cancer and do not contain asbestos. Despite this stance, the company has been hit with approximately 61,000 lawsuits alleging that its baby powder and other talc products were contaminated with asbestos, leading to ovarian and other cancers. Erik Haas, worldwide vice president of litigation for J&J, emphasized the company’s “extensive, good-faith efforts” to resolve the litigation for the benefit of all stakeholders. J&J argues that this bankruptcy plan offers claimants a better recovery than they would likely receive at trial.

Legislative Pushback: Challenges to the “Texas Two-Step”

While J&J and Red River Talc LLC push forward with this bankruptcy strategy, they face ongoing legal and legislative challenges. The company’s use of the “Texas two-step” bankruptcy tactic has drawn criticism and scrutiny. In July, a bill was introduced in the Senate to block wealthy companies from using this specific approach to manage their liabilities. This legislative effort underscores the controversial nature of J&J’s strategy and the broader debate over how large corporations should be held accountable for product-related injuries. The outcome of this bankruptcy case and any related legislation could have significant implications for how future mass tort cases are handled in the United States.

Ripple Effects: Claimants and Corporate Accountability

The resolution of this case will have far-reaching consequences for the thousands of individuals who have filed claims against J&J and the broader landscape of corporate liability in product injury cases. The $8 billion settlement spread over 25 years would compensate many claimants if approved. However, it remains to be seen whether this amount will be deemed sufficient, given the scale and severity of the alleged injuries. The case also raises important questions about the balance between providing relief to injured parties and allowing companies to manage their liabilities in ways that some view as circumventing full accountability. As this bankruptcy process unfolds, legal experts, policymakers, and corporate leaders will be closely watched for its potential to set precedents for how large-scale product liability cases will be resolved.