A US judge has rejected Johnson & Johnson’s (J&J) third attempt to quash its ongoing talc scandal via a US$10bn settlement.
The US Bankruptcy Court for the Southern District of Texas denied the request by J&J to confirm its proposed prepackaged bankruptcy plan.
The multi-billion dollar corporation is still grappling with lawsuits from more than 62,000 claimants alleging its talc products caused cancer.
J&J has argued that said talc products are safe, do not contain asbestos and do not cause cancer.
The personal care goliath has been attempting to shift the litigation via a legal move known as the ‘Texas two-step’, which allows companies to offload liabilities to a new company.
The aim was to move the liabilities onto a subsidiary created by J&J, LTL Management, which would then apply for bankruptcy to take the brunt of the mass litigation.
This attempt has been rejected twice, with the Third U.S. Circuit Court of Appeals in Philadelphia dismissing the original Chapter 11 petition filing in 2023.
It ruled that the healthcare and personal care giant improperly placed a subsidiary into Chapter 11 proceedings even though it did not face financial distress.
The three-judge panel, in a 56-page opinion, wrote: “Good intentions – such as to protect the J&J brand or comprehensively resolve litigation – do not suffice alone.”
The Third U.S. Circuit Court of Appeals would go on to reject the claim once again, on the same grounds, in July 2024.
In J&J’s most recent attempt at the move, Houston-based Bankruptcy Judge Christopher Lopez said the company “did not belong in bankruptcy”.
"While the court’s decision is not an easy one, it is the right one," said Lopez in a statement seen by Reuters.
The judge claimed there were “too many problems to be fixed” via the bankruptcy.
He added that it also did not "sufficiently support” the women who have been allegedly affected by the talc products.
Rather than pursuing a protracted appeal, J&J said it will return to the tort system to “litigate and defeat [the] meritless talc claims”.
“The court has unfortunately allowed a couple of law firms with financially conflicted motives, who have conceded they have not recovered a dime for their clients in a decade of litigation, to defeat the overwhelming desire of claimants,” said Erik Haas, Worldwide VP of Litigation at J&J.
“As we have repeatedly stated, in the absence of plan confirmation, we will vigorously present our case in the tort system, starting with the adjudication of the motions pending in the Multi-District Litigation to exclude plaintiffs’ experts and to disqualify the lead counsel for its unethical breaches.”
J&J added that talc litigation is a “plaintiff-lawyer driven fake tort, premised on junk science and fueled by third-party litigation financing including from foreign sovereign wealth funds”.
Haas added: “Today’s decision highlights the broken tort system in the United States..
“The company reiterates that none of the talc-related claims against it have merit and attempts to resolve this litigation were aimed at moving past this issue.
“The decision to litigate every filed case is based on the simple fact that this is a fake claim created by greedy plaintiff lawyers looking for another deep pocket to sue and fuelled by litigation-financed attorney advertising.”
In August 2022, J&J decided to end all global sales of its talc-based baby powder, marking the end of a 100-year era for its signature product.
The personal care goliath transitioned to an all-cornstarch-based baby powder portfolio instead, following an assessment of its worldwide product range.
Cosmetics Business has contacted J&J for a comment.