J&J unit says cancer victims who won't settle seek to block $8.9 bn deal

By Steven Church and Jonathan Randles

A Johnson & Johnson unit said cancer victims who refuse to settle with the company are attempting to intimidate other claimants from signing onto an $8.9 billion deal to end lawsuits over allegedly tainted baby powder.

The health-care giant is trying for the second time to use the bankruptcy of its LTL Management to round up support for a plan that would settle more than 40,000 lawsuits that allege baby powder contained talc that was tinged with asbestos, a toxic substance. 

LTL has the backing of 60,000 victims, or about two thirds of all claimants, lawyer Gregory M. Gordon said in federal court on Tuesday. The company must get to 75% to have a chance at winning approval for the deal from US Bankruptcy Judge Michael Kaplan. The holdouts are working to block the company from reaching that goal, Gordon said.

As the bankruptcy goes forward, LTL and J&J will present evidence to “show an aggressive, concerted effort by the plaintiff firms on this committee to scuttle this agreement through threats and intimidation directed at LTL, J&J” and plaintiffs who support the plan, Gordon said.

Law Firms Split
 

The $8.9 billion deal has split the many law firms who are representing tens of thousands of women who claim they got cancer from baby powder. Opponents claim J&J wrongly put LTL back into bankruptcy just hours after its first effort was dismissed on orders from a federal appeals court.  

“For people suffering and dying of cancer, most of the time it’s not about money,” said Joseph D. Satterley, a lawyer opposed to the deal said in court. “Most of the time it’s about justice.”

A group of lawyers opposed to the deal claim that J&J committed a fraudulent transfer by refining its legal tactics and putting LTL back in bankruptcy. 

In bankruptcy, a fraudulent transfer is typically a transaction in which a parent company takes something valuable away from a unit, leaving the subsidiary without enough money to pay its debts. 

In this case, critics claim that J&J tried to make LTL qualify for a second bankruptcy by canceling an agreement that would have provided as much as $61 billion for LTL to settle the talc claims. 

J&J rejected that legal theory. The company also denies that its baby powder contained asbestos or that the product caused cancer. The company has taken its talc-based baby powder off the market.

Legal experts say J&J’s latest strategy is risky because it relies on tweaking the details of the original LTL bankruptcy and immediately resubmitting the case. 

J&J faces two major hurdles: it must survive any new legal challenge from opponents who argue the second case is just as flawed as the first, and it has to convince 75% of all victims to vote in favor of the deal.

Earlier this year, an appeals court rejected J&J’s first bid to use LTL’s Chapter 11 filing to settle the lawsuits because the unit was not in financial distress and therefore did qualify for court protection. Last week, that dismissal became official.

J&J argues this time is different because they have support from many more cancer victims. The company also replaced its original promise to financially support LTL with a much more limited pledge. That change means LTL is distressed and therefore can return to bankruptcy, the company argued in court papers.

J&J first put LTL into bankruptcy in 2021 and within months convinced Kaplan to halt all talc trials and order victims into court-supervised mediation.

The new bankruptcy filing is LTL Management LLC, 23-12825, U.S. Bankruptcy Court for the District of New Jersey (Trenton).