J&J subsidiary files for bankruptcy for third time to settle talc lawsuits

A Johnson & Johnson subsidiary filed for bankruptcy protection for the third time in an effort to resolve the tens of thousands of lawsuits claiming its baby powder and other talc products caused cancer.

Red River Talc LLC filed a voluntary prepackaged Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Southern District of Texas to end all current and future claims related to ovarian cancer arising from its products. Under its latest settlement proposal, Red River agreed to pay $8 billion to claimants over the course of 25 years, which is $1.75 billion more than its prior proposal.

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The health care giant has been hit with about 61,000 lawsuits alleging that the baby powder and other talc products were contaminated with asbestos, causing ovarian and other cancers. J&J has maintained that the products don’t cause cancer or contain asbestos.

“The overwhelming support for the Plan demonstrates the company’s extensive, good-faith efforts to resolve this litigation for the benefit of all stakeholders,” Erik Haas, worldwide vice president of litigation for J&J, said. “This plan is fair and equitable to all parties and, therefore, should be expeditiously confirmed by the Bankruptcy Court.”

J&J deferred comment to its press release .

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The subsidiary said it filed for bankruptcy after its proposed plan received support from 83% of the current claimants, surpassing the 75% approval threshold required by U.S. bankruptcy code.

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Red River agreed to commit an additional $1.1 billion to the bankruptcy trust for distribution to claimants. J&J backed its commitments and agreed to contribute an additional $650 million to resolve the claims for legal fees and expenses sought by plaintiffs’ counsel.

J&J said in a notice that this plan “affords claimants a far better recovery than they stand to recover at trial.”

However, the company’s so-called “Texas two-step” bankruptcy strategy still faces hurdles. In J&J’s case, the company is trying to offload its talc liability onto a newly created subsidiary, which declares Chapter 11. This keeps J&J from having to file for bankruptcy.

A bill introduced in July by senators aims to block wealthy companies from using this specific tactic.

Reuters contributed to this report.

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