J&J Offered Talc Victims $4 Billion to Settle Claims Months Before Unit’s Bankruptcy
(Bloomberg) -- Months before putting one of its units into bankruptcy, Johnson & Johnson offered $4 billion to settle with victims of its talc-based powder -- twice the amount it’s now proposing to pay through a forced resolution, according to people familiar with the matter.
The $4 billion offer was aimed at ending more than seven years of litigation over claims its iconic baby powder caused different types of cancers. J&J faces nearly 40,000 suits targeting its talc-based products, and has agreed to about $3.5 billion in settlements so far, according to court filings.
The world’s largest maker of health-care products wanted to split the $4 billion between trusts established to settle current and future suits, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The trusts would have been created as part of the 2019 bankruptcy case filed by Imerys Talc America Inc., J&J’s talc miner, the people said. Representatives for J&J and Imerys declined to comment.
Lawyers representing a substantial number of talc plaintiffs rejected the $4 billion settlement offer as part of the Imerys case as too low, the people said. Plaintiffs would have each received about $40,000 for their cases on average, the people added.
J&J last made the proposal in March. After it was rebuffed, the company’s attorneys told their counterparts to prepare for a bankruptcy filing by a J&J unit later in the year, the people said.
On Oct. 14, a newly created J&J subsidiary filed for bankruptcy protection after arguing it was struggling to contain more than 38,000 suits blaming its iconic baby powder and other talc-based products of causing cancer. It’s planning to put $2 billion into a trust as part of the unit’s bankruptcy to resolve all of its talc liability.
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In a hearing this week in Charlotte, North Carolina, J&J lawyer Greg Gordon told U.S. Bankruptcy Judge Craig Whitley that the $2 billion is the company’s opening bid in a new effort to settle the talc litigation. Gordon said the $2 billion is not intended to “set a ceiling” for any talc accord.
J&J officials argue they had no choice but to turn to the bankruptcy process to corral the litigation, warning it could take decades to resolve all the cases. The company has said it’s already paid $1 billion in talc-related legal fees over the last five years. Last year, it pulled the talc version of its baby powder off the U.S. and Canadian markets.
The New Brunswick, New Jersey-based company proposed using the Imerys case for the deal because it’s currently battling with the talc miner over its claims that indemnity agreements put the baby-powder maker on the hook for Imerys’ talc exposure. J&J offered to take over Imerys’ talc defenses and negotiated settlements of suits against both companies, according to court filings.
J&J wants to use federal laws allowing companies to file for bankruptcy to deal with litigation that poses a threat. Once in Chapter 11, companies can set up trusts to pay current and future claims and plaintiffs’ are required to participate in the process.
Such trusts were made popular during decades-long litigation over asbestos, a cancer-causing material used as insulation in construction and car brake pads. Some talc plaintiffs contend J&J’s baby powder was tainted with asbestos, which can cause a variety of cancers. Others say talc -- by itself -- can cause ovarian cancer.
Elizabeth Burch, a University of Georgia law professor who follows talc litigation, said $4 billion wouldn’t provide proper payouts for women fighting an often-fatal disease such as ovarian cancer.
“That wouldn’t even cover most people’s economic damages,” such as health costs and lost wages, she said.
J&J’s decision to turn to bankruptcy is also questionable, Burch added.
“J&J is trying to cram down a settlement that will give these folks pennies-on-the-dollar for their damages,” she added.
The case is LTL Management LLC, 21-30589, U.S. Bankruptcy Court for the Western District of North Carolina (Charlotte).
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