J&J Left to Fend for Itself in Talc Suits After Supplier’s Bankruptcy
(Bloomberg) -- Johnson & Johnson now finds itself alone in fighting the claims of a dying California woman and thousands of people like her who allege that the company’s iconic baby powder contained asbestos and caused their cancers.
That’s because J&J’s talc supplier, Imerys Talc America Inc., was dropped as a defendant in Teresa Leavitt’s case in the middle of her trial last week after the mining company sought bankruptcy protection. The filing is tailored to deal with a swelling wave of lawsuits claiming Imerys’s product contained asbestos.
The move by the unit of Paris-based Imerys SA and two other subsidiaries to shield themselves from what may be billions of dollars in liabilities leaves J&J as the sole target for thousands of women with pending suits. These consumers allege that regular use of the company’s iconic baby powder led to mesothelioma, a cancer linked to asbestos exposure, or ovarian cancer.
The disappearance of Imerys Talc America from Leavitt’s trial is the first ripple of the bankruptcy’s effects on the talc-litigation landscape, said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia.
“That jury in California won’t have to decide who is more at fault for this lady’s illness because they only have one defendant in the case now,’’ Tobias said. “It really puts J&J more in the crosshairs for all of these cases.’’
Ernie Knewitz, a J&J spokesman, declined to comment on the Imerys units’ bankruptcies or how the filings may affect J&J’s strategy for fending off talc suits. The company said in a securities filing Wednesday that it now faces more than 13,000 talc suits, up from more than 11,000 as of last year.
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J&J also disclosed it has received subpoenas and inquiries on its talc baby-powder products from federal prosecutors and securities regulators, a new front in the health giant’s mounting legal woes assailing one of its signature products. The company said it’s cooperating with government officials.
“We’d urge J&J to come clean about this risk, compensate these victims and their families, and provide adequate warnings on its packaging or simply pull this product off the shelves,” said Ted Meadows, a plaintiffs’ attorney.
Under U.S. law, once a company seeks protection from creditors, all litigation is halted. That gives the firm time to decide how to reorganize its finances and satisfy claims. The Imerys units have said they face more than 14,000 talc-related suits.
In Leavitt’s case, California Superior Court Judge Brad Seligman in Oakland announced Imerys Talc America’s departure from the case Feb. 14, but warned jurors not to speculate about why the mining company was no longer a defendant, according to media reports. Closing arguments are expected in the case next month.
J&J and Imerys’ units have been hit with sizeable verdicts over claims their products caused cancer. Last year, a New Jersey jury ordered the companies to pay about $117 million to a man who said his baby powder use led him to develop mesothelioma.
Under New Jersey law, jurors had to assess how much responsibility J&J and Imerys bore for Stephen Lanzo’s injuries. The panel found J&J liable for 70 percent of the compensatory damages and Imerys for 30 percent.
Both J&J and its talc supplier reject claims their products cause cancer and say repeated scientific studies have found no asbestos in talc used in baby powder and other products.
Imerys officials said they were forced to seek protection from creditors because of plaintiffs’ increased settlement demands in the wake of recent jury verdicts and disputes over insurance coverage. The bankruptcy filings corral the suits before one judge and put pressure on plaintiffs to take smaller settlements.
Still, some plaintiffs’ lawyers see the filings as Imerys waving a white flag on the question of how seriously it takes the talc claims.
The Chapter 11 filings “validate the claims of thousands of women who are suffering or who lost their lives’’ as a result of tainted baby powder, said Leigh O’Dell, a plaintiffs’ lawyer who is overseeing thousands of talc claims consolidated in federal court in New Jersey.
Tobias said the filings may send a signal to potential jurors in future cases that the talc cases have enough significance -- both factually and financially -- that the Imerys units couldn’t handle them through the regular courts.
“It’s events such as these that create a dynamic in litigations that can drive settlements,’’ he said. While J&J reached its first out-of-court resolution of a talc case in December, Knewitz said the deal wasn’t a signal the company was shifting into settlement mode.
“In litigation of every nature there are one-off situations where settlement is a reasonable alternative,’’ Knewitz said. “We do not have any organized program to settle Johnson’s Baby Powder cases, nor are we planning a settlement program.’’
The Imerys units have worked with J&J on talc legal exposure for more than 30 years, but the companies are at odds over who should pay jury awards in the cases, according to bankruptcy court filings.
The Imerys units contend they signed indemnification agreements with J&J -- some stretching back to the 1980s -- that absolve them of paying damages for ovarian cancer and mesothelioma claims tied to baby powder. But J&J officials have denied those agreements exist or disputed their terms, according to the filings.
The bankruptcy filing will facilitate a more rapid ruling on the indemnity issue than if the company litigated it through the regular court system, said Jean Eggen, who teaches mass tort-law at Widener University’s law school in Delaware.
“This kind of side litigation can be expensive and time-consuming,’’ Eggen said. “It can be teed up in bankruptcy court pretty quickly and has a judge deciding it rather than a jury.’’
J&J can still seek to force the Imerys units to pick up part of the tab for talc damage awards by filing claims as part of their bankruptcies, Eggen said. But the chances of getting a meaningful recovery is probably slim, she added.
“They will have to get in line with the rest of the creditors and there may not be much money left by the time they get their claim heard,’’ the professor said.
The bankruptcy case is In Re Imerys Talc America Inc., 19-10289, U.S. Bankruptcy Court, District of Delaware (Wilmington). The case on trial is Leavitt v. Johnson & Johnson, No. RG17882401, Califoria Superior Court, Alameda County (Oakland).
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