By Dietrich Knauth
(Reuters) -Cancer victims on Monday urged a U.S. judge to dismiss a Johnson & Johnson (NYSE:JNJ) subsidiary's second bankruptcy filing, saying the company is abusing the bankruptcy system in its renewed attempt to resolve tens of thousands of lawsuits alleging that J&J's baby powder and other talc products caused cancer.
The J&J subsidiary, LTL Management, this month filed for bankruptcy a second time, seeking to settle all current and future talc claims for a proposed $8.9 billion. LTL's first bankruptcy was dismissed after a federal appeals court ruled the company was not in financial distress and therefore not eligible for bankruptcy.
Plaintiffs have filed more than 38,000 lawsuits that have been consolidated in federal court in New Jersey alleging that J&J talc products sometimes contained asbestos and caused ovarian cancer or mesothelioma. J&J has said its talc is safe, asbestos-free and does not cause cancer.
The plaintiffs allege that J&J’s actions amount to a manipulation of the bankruptcy system by a multinational conglomerate valued at more than $400 billion and in little danger of running out of money to pay cancer victims or their family members.
LTL could have made a honest settlement offer after its first bankruptcy failed, but instead allowed itself to be stripped of funding so that its second bankruptcy could impose the settlement on unwilling plaintiffs and future claimants, the plaintiffs' attorneys wrote in a Monday filing in U.S. bankruptcy court in Trenton, New Jersey.
Erik Haas, J&J's vice president of litigation said in a statement on Monday that the settlement has significant support from other attorneys representing cancer victims and that claimants should vote on the proposed settlement in bankruptcy court.
"The motion is nothing more than a desperate attempt to prevent the tens of thousands of claimants from deciding for themselves," Haas said.
J&J and LTL have argued that bankruptcy delivers settlement payouts more fairly, efficiently and equitably than a “lottery” offered by trial courts, where some litigants get large awards and others nothing.
Lawyers opposed to the deal said J&J's settlement support number is inflated by claimants who have never filed lawsuits against the company and whose claims may not be fully vetted.
The healthcare conglomerate has not filed for bankruptcy itself. Instead, it divided its consumer business in two in October 2021 and offloaded the talc lawsuits onto the newly created subsidiary LTL. LTL filed for bankruptcy days after it was created, putting a halt to the lawsuits.
U.S. Bankruptcy Judge Michael Kaplan, who has presided over both of the company's bankruptcy cases, ruled last week that the cases should remain paused for at least 60 more days.
At a hearing last Thursday, Kaplan said he "had more questions than answers" regarding the new bankruptcy, and that LTL has an "uphill battle" on its second attempt to resolve the lawsuits in bankruptcy court.
At the start of LTL's second bankruptcy, Kaplan rejected some plaintiffs' demand that he immediately dismiss the new bankruptcy case, but he said he would fully consider a more formal request made with more evidence in support of it.