Listen to this article

A federal judge rejected Johnson & Johnson‘s proposed $9 billion settlement to end tens of thousands of lawsuits claiming the New Brunswick-based health conglomerate’s talc-based products caused ovarian cancer.

Following a two-week trial in Houston, U.S. Bankruptcy Judge Christopher Lopez ruled March 31 that J&J could not resolve the cases via bankruptcy of Red River Talc, a subsidiary company created to absorb mass talc liabilities, Bloomberg reported.

In his decision, Lopez said J&J used a flawed process to solicit votes of support from claimants for the prepackaged bankruptcy plan. Irregularities cited include “an unreasonably short voting time for thousands of creditors,” according to Bloomberg.

After announcing the proposal in May 2024, J&J increased its settlement offer last fall with an additional $1.1 billion. As a result, more claimants favored the deal. That gave the company the support necessary to meet a 75% threshold required by the bankruptcy code, Bloomberg reported.

If the necessary percentage of claimants were in favor, J&J said it would pay out over 24 years. The company has said the plan represents a “far better recovery than the claimants stand to recover at trial.”

It would also end litigation entirely — shutting off future lawsuits and preventing individuals from opting out of the deal to pursue their claims separately.

During the trial, J&J said more than 80% of claimants voted to back the settlement. Accordingly, the company said it based its Red River Talc unit’s fast-track bankruptcy case on that support. It also said it clearly laid out the terms of the proposal to current and future claimants and properly conducted the vote, Insurance Journal reported.

Improper use?

According to Reuters, J&J said during the trial that its third proposal should succeed because it included more money. The company also noted the deal a majority of plaintiffs voted on and backed the deal.

Although most prominent mass tort attorneys handling the more than 60,000 talc suits filed so far favor the settlement, a handful of lawyers – as well as a government watchdog agency – wanted the court to reject the plan. They argued that J&J was again trying to improperly use Chapter 11 as well as manipulated the vote to push the settlement proposal.

Federal judges in Trenton and Philadelphia axed J&J’s two prior attempts to settle talc cases via bankruptcy. They both ruled that the parent company was financially capable of paying claims without bankruptcy protection.

J&J maintains its talc products are safe and do not cause cancer. However, the company switched to a cornstarch version of baby powder in the U.S. in 2020 and globally in 2023.

At the time of J&J’s second bankruptcy filing in April 2023, the company proposed an $8.9 billion settlement to resolve current and future claims related to mesothelioma. The rare form of cancer is linked to asbestos exposure. After that deal’s rejection, J&J said it determined it was more practical to settle those claims outside of bankruptcy, before addressing the much larger group of ovarian cancer claims.

J&J has also said the company has resolved about 95% of the hundreds of mesothelioma cases it faced.

Additionally, J&J agreed to pay $700 million to settle an investigation by 42 states and Washington, D.C., into the marketing of talc-based products blamed for allegedly causing cancer.

A ‘broken tort system’

In a statement following Lopez’s ruling, J&J noted that the rejection comes despite offering “one of the largest settlements ever proposed in a mass tort bankruptcy and was supported by the overwhelming majority of claimants.”

The company will not pursue an appeal.

J&J said it will instead return to the tort system “to litigate and defeat these meritless talc claims.” It also plans to reverse about $7 billion from amounts previously reserved for the bankruptcy resolution.

Erik Haas is J&J’s worldwide vice president of litigation. “The court has unfortunately allowed a couple of law firms with financially conflicted motives, who have conceded they have not recovered a dime for their clients in a decade of litigation, to defeat the overwhelming desire of claimants,” he remarked. “As we have repeatedly stated, in the absence of plan confirmation, we will vigorously present our case in the tort system, starting with the adjudication of the motions pending in the Multi-District Litigation to exclude plaintiffs’ experts and to disqualify the lead counsel for its unethical breaches.”

“In view of the learnings from the bankruptcy case, we are more confident than ever in our position in the tort system,” he went on. “We prevailed in 16 of 17 ovarian cases tried in the last 11 years and will devote our efforts to defeating these fake claims.”

Haas added, “Today’s decision highlights the broken tort system in the United States. The company reiterates that none of the talc-related claims against it have merit and attempts to resolve this litigation were aimed at moving past this issue. The decision to litigate every filed case is based on the simple fact that this is a fake claim created by greedy plaintiff lawyers looking for another deep pocket to sue and fueled by litigation-financed attorney advertising.”