U.S. Bankruptcy Court Rejects Johnson & Johnson's Talc Settlement Proposal

A U.S. bankruptcy court has turned down Johnson & Johnson's proposed settlement plan concerning its baby powder products that contain talc, marking a significant hurdle for the company in its ongoing legal battles. This ruling represents the third bankruptcy case filed by a J&J subsidiary in relation to talc-related claims.

Red River Talc LLC, a subsidiary of Johnson & Johnson, sought judicial approval for a prepackaged Chapter 11 bankruptcy plan that would have facilitated one of the largest mass tort settlements in U.S. history, had it been sanctioned. The plan proposed a payout of $9 billion to resolve litigation concerning ovarian cancer and other gynecological conditions allegedly linked to the use of talc-based products.

Judge Christopher Lopez of the U.S. Bankruptcy Court for the Southern District of Texas determined that Johnson & Johnson had improperly solicited votes from personal injury claimants, thereby invalidating their proposed plan.

In response to the ruling, Johnson & Johnson announced that it would not appeal the decision. Instead, the company plans to address these claims through the civil court system, asserting its intention to contest what it refers to as baseless allegations regarding talc. Furthermore, J&J indicated it would withdraw approximately $7 billion from a previously established reserve meant for these claims. The company claims to have successfully settled 95% of filed mesothelioma lawsuits and concluded all state-level consumer protection claims and disputes with talc suppliers.

In a prior proposal, a subsidiary of J&J had offered to pay roughly $6.48 billion over a period of 25 years as part of a settlement aimed at addressing allegations that its talc-containing baby powder led to the development of ovarian cancer.

The legal actions against Johnson & Johnson have alleged that its talcum powder products contributed to the onset of ovarian cancer when used for feminine hygiene purposes, as well as mesothelioma, a serious cancer affecting the lungs and other organs. These allegations have adversely impacted the company's sales of baby powder, prompting J&J to discontinue the sale of talc-based products in 2020. In 2022, the company announced plans to halt the global distribution of these products.

At the time of the initial reorganization proposal, J&J asserted that the new plan was markedly different from earlier restructuring efforts and claimed it would effectively settle 99.75% of all outstanding talc lawsuits against itself and its affiliates in the United States. The company also noted that any remaining personal injury lawsuits related to mesothelioma would be managed outside of the proposed bankruptcy plan.

Following the court's decision, Johnson & Johnson's stock experienced a decline of over 3% in pre-market trading.