US judge rejects J&J's $10 billion baby powder settlement

By Dietrich Knauth

NEW YORK (Reuters) -A U.S. bankruptcy judge on Monday rejected Johnson & Johnson's $10 billion proposal to end tens of thousands of lawsuits alleging that its baby powder and other talc products cause ovarian cancer, marking the third time the company's bankruptcy strategy has failed in court.

J&J has been attempting to resolve the lawsuits through a subsidiary company’s bankruptcy, after two previous bankruptcy attempts failed in other courts.

But the judge overseeing its case, U.S. Bankruptcy Judge Christopher Lopez in Houston, said that the company did not belong in bankruptcy. 

"While the Court’s decision is not an easy one, it is the right one," Lopez wrote.

Lopez said J&J's proposed settlement did not have sufficient support from women who alleged J&J products caused their cancer. It also went too far in releasing legal claims against entities that had not filed for bankruptcy themselves, including retailers that sold J&J products and Kenvue, a consumer health business that J&J spun off in 2023. The proposal had too many problems to be fixed in bankruptcy, Lopez wrote.

J&J said in a statement that it would not appeal, but also that it had no intention of settling the claims and would instead "return to the tort system to litigate and defeat these meritless talc claims."

Andy Birchfield, an attorney who represents plaintiffs opposed to the bankruptcy settlement, said that J&J's bankruptcy strategy was "nothing more than a bad-faith maneuver to avoid full accountability.”

“With this ruling, we are now moving forward without delay to trial, where our clients will finally have the chance to present their cases before a jury and obtain the justice they deserve,” Birchfield said.

J&J had argued that the third proposal, in Texas bankruptcy court, should succeed because there was more money on the table and the deal was supported by a majority of cancer victims who voted on it.

"UNNECESSARILY RUSHED"

Lopez criticized the votes that J&J collected from plaintiffs' attorneys, saying there were serious flaws in votes cast both for and against the plan. J&J collected 90,000 votes, saying it had 83% of plaintiffs' support, but Lopez said that "at least half should not be counted." Some lawyers voted on their clients' behalf without having clear authority to do so, and others said they had obtained their clients' consent but did not present proof that they had spoken with them, Lopez said.

J&J "unnecessarily rushed" the votes, and plaintiffs' lawyers testified that they were forced to cast votes on their clients' behalf instead of allowing them to vote directly, according to Lopez's opinion.

Opponents of the deal, including attorneys for some cancer victims and a government bankruptcy watchdog, had argued that the third bankruptcy, like the first two, should be dismissed because the company is not in “financial distress.” A wealthy company like J&J should not use bankruptcy to prevent cancer victims from having their day in court, opponents said.

J&J faces lawsuits from over 60,000 claimants alleging that its baby powder and other talc products contained asbestos and caused ovarian cancer. The settlement would have ended those lawsuits and prevented similar lawsuits from being filed in the future. 

J&J, which began selling Johnson's baby powder in 1894, says that its products are safe, do not contain asbestos, and do not cause cancer. J&J stopped selling talc-based baby powder in the U.S. in 2020, switching to a cornstarch product.

Before its third bankruptcy attempt, which sought to settle claims that its talc products caused ovarian and other gynecological cancers, J&J had separately settled lawsuits alleging that they caused mesothelioma, a rare form of cancer associated with asbestos exposure.

J&J had estimated that ovarian cancer patients would receive between $75,000 and $150,000 under the settlement, although the exact amounts depended on the severity of a patient's injury and the number of current and future claims that were ultimately covered by the settlement.

(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi, Stephen Coates and Shri Navaratnam)