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Johnson & Johnson (JNJ.US) cleared the way for a $6.5 billion talcum powder settlement.

AInvestTuesday, Aug 13, 2024 1:40 am ET
1min read

Johnson & Johnson (JNJ.US) has cleared a key hurdle in its $6.5bn baby powder settlement, with more than 75% of claimants voting in favour of the proposal, clearing the way for the company to seek bankruptcy protection for its subsidiary to resolve the litigation.

“We are unable to comment on the vote as the results are not final,” said a spokesperson for Johnson & Johnson, Clare Boyle. The company previously indicated that it believed its settlement proposal would ultimately receive sufficient support from claimants to move forward.

Johnson & Johnson faces more than 61,000 plaintiffs who allege that the company’s baby powder and other talc products were contaminated with asbestos, causing ovarian cancer and other cancers. The company has denied the allegations and said its products are safe.

The healthcare giant has twice had its attempts to end the litigation through a so-called “Texas two-step bankruptcy” dismissed by federal courts.

The strategy involves transferring the talc business to a new subsidiary and then having that subsidiary seek bankruptcy protection. The goal is to use the process to force all claimants to settle without Johnson & Johnson itself having to file for bankruptcy.

But the company needs 75 per cent of the claimants to vote in favour of the settlement before it can ask a bankruptcy judge to impose the settlement on all claimants.

Johnson & Johnson’s bankruptcy strategy still faces legal hurdles. The US Supreme Court recently ruled in the Purdue Pharma bankruptcy case, limiting the ability of courts to block lawsuits against non-bankrupt individuals and companies such as Johnson & Johnson without the consent of the claimants.

Johnson & Johnson has said that the Purdue decision would not affect its settlement proposal because the US bankruptcy code provides clear legal protections for non-bankrupt asbestos defendants. The company said it was eligible for those protections.

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