Talc Wars: J&J Accused of Bankruptcy Scheme to Evade Cancer Lawsuits

Johnson & Johnson faces renewed controversy over its talcum powder products, with cancer victims alleging the company manipulated the bankruptcy system to dodge lawsuits. The class action lawsuit, filed by five plaintiffs representing over 50,000 individuals, accuses J&J of fraudulent financial maneuvers and a "bait-and-switch" settlement tactic.

In the lawsuit, the victims say Johnson & Johnson has undertaken a scheme whereby it has used shell companies in attempts to claim bankruptcy multiple times so it can resolve tens of thousands of lawsuits without meeting victims in court, New York Post reports. The company’s latest bankruptcy attempt is a continuation of the same scheme, the plaintiffs allege.

"Texas Two-Step" and Asset Stripping

Specifically, the lawsuit claims J&J created shell companies to absorb talc-related liabilities and then declare bankruptcy for these entities. This strategy, known as the "Texas two-step," has been rejected by courts twice before. Additionally, the lawsuit accuses J&J of "asset stripping fraud" by moving or hiding funds to make it harder for victims to collect damages.

The five plaintiffs, who say they represent more than 50,000 people involved in legal action against Johnson & Johnson, argue in the lawsuit that the company has committed fraud and, according to an attorney for the plaintiffs Mike Papantonio, is “playing a dark game of chess with this country’s financial and judicial systems.”

For this third attempt, J&J is offering a $6.48 billion settlement to victims of ovarian cancer as part of the bankruptcy filing, which would end the litigation in 99 percent of talc related lawsuits against the company. Victims have been given a three month voting period to decide whether the bankruptcy should be allowed to proceed.

While the lawyers for some victims have expressed satisfaction with the deal, Reuters reports, others, including those behind the lawsuit, say it is an illegal cop out undertaken solely to protect the company’s assets. 

Years of Legal Battles and Asbestos Concerns

For a number of years J&J has been under the spotlight for its baby powder and other talc products possibly containing asbestos and causing a cancer known as mesothelioma. Talc and cancer-causing asbestos are both collected from the ground and asbestos has been found contaminating talc collections. 

In 2019, J&J issued a major product recall after traces of asbestos were found in their talcum powder products. The company has insisted its products are now safe, but are shifting gears to cornstarch-based formulas in North America. 

Since the recall, more than 53,000 lawsuits have been filed against J&J. Many have been consolidated into a multi-district litigation in New Jersey, and others have been consolidated elsewhere. 

J&J Denies Wrongdoing, Cites Settlement Attempts

Erik Haas, worldwide vice president of litigation for Johnson & Johnson, said in a statement that the lawsuit is frivolous. 

“This latest filing – signed again by the same small group of plaintiffs lawyers who have fought every single effort to resolve this litigation to date – is more of the same. The question remains: Why won’t they let claimants decide for themselves what is or is not in their own best interest? Why are they so desperate to stop the vote?”

He argues that J&J has offered plaintiffs one of the largest resolutions in the history of mass tort litigation, adding “it has prevailed in 16 of 17 ovarian cancer trials, including every ovarian trial for the past six years."

Recently, the company has reached settlements with mesothelioma patients and U.S. states accusing the company of failing to warn consumers about the dangers of talc, Reuters reported. In one case, the company was ordered to pay $45 million to a victim of mesothelioma.

"Our focus has been and will remain reaching a full, fair and final resolution of this litigation, and allowing the claimants to speak for themselves," Haas said. "We will immediately move to dismiss this latest ‘hail Mary’ frivolous filing.”

The plaintiffs in the new lawsuit want to represent anyone who, as of August 11, 2023, had pending litigation alleging asbestos or other ingredients in Johnson & Johnson talcum powder products caused them to develop ovarian cancer or mesothelioma, USA Today reports.