Johnson & Johnson Subsidiary Files for Bankruptcy Amid $10 Billion Talc Litigation Settlement Effort

According to Reuters, a subsidiary of Johnson & Johnson applied for bankruptcy for the third time on the 20th local time. The company is seeking to advance a settlement plan of approximately $10 billion to resolve tens of thousands of lawsuits alleging that its baby powder and other talc products cause cancer.

Report: Over 62,000 plaintiffs claim Johnson & Johnson's baby powder and other talc products were contaminated, leading to ovarian cancer and other cancers. To halt the lawsuits, Johnson & Johnson's subsidiary Red River Talc filed for bankruptcy protection in the Federal Bankruptcy Court in Houston.

Erik Haas, Vice President of Global Litigation at Johnson & Johnson, stated that the settlement agreement is "fair and equitable to all parties," with 83% of claimants voting in favor.

However, the settlement proposal has caused divisions among lawyers representing cancer victims. Opponents stated that they would promptly request the court to dismiss Johnson & Johnson's bankruptcy application or transfer it to New Jersey. The courts in that state had twice rejected the company’s attempts to end litigation through the so-called "Texas Two-Step" bankruptcy method.

Andy Birchfield, the lawyer opposing the deal, said that Johnson & Johnson is exploiting the bankruptcy system in an attempt to reduce compensation for tens of thousands of cancer patients.

The report introduced that the "two-step" strategy adopted by Johnson & Johnson is to transfer debt to a newly established subsidiary, which then declares bankruptcy. This is a court-supervised restructuring of assets and debts through bankruptcy, with the aim of using the procedure to force all plaintiffs to reach a settlement.