Judge Rejects J&J’s Third Bankruptcy Filing, Killing $9B Talcum Powder Settlement

Federal bankruptcy court will not allow Johnson & Johnson to force the settlement of talcum powder lawsuits through a bankruptcy filing, sending lawsuits back to the U.S. civil court system.

A federal judge has rejected Johnson & Johnson’s latest attempt to use bankruptcy to settle tens of thousands of lawsuits over its talcum powder products, marking the third time the company’s controversial strategy has failed in court.

The lawsuits involve more than 90,000 Baby Powder lawsuits and Shower-to-Shower lawsuits filed by women nationwide, who claim to have developed ovarian cancer and other malignancies targeting their reproductive systems. The lawsuits came after years of Johnson & Johnson promoting the products for genital use.

In recent years, Johnson & Johnson has tried multiple times to limit its legal exposure by using a bankruptcy maneuver known as the “Texas Two-Step.” The strategy involves creating a new subsidiary, transferring all talc-related legal liabilities to that company, and then having the new entity file for Chapter 11 bankruptcy. If approved, it would allow J&J to settle claims for far less than what plaintiffs might receive through individual lawsuits.

The company’s first two bankruptcy filings were rejected by judges who ruled that J&J wasn’t in financial distress and was acting in bad faith. In 2023, a federal appeals court dismissed a similar bankruptcy filing effort involving a J&J subsidiary called LTL Management.

In 2024, J&J made a third attempt, this time filing in Texas with a new subsidiary named Red River Talc, and proposing an $8.9 billion settlement fund. The company claimed the offer had support from over 75% of plaintiffs, but critics, including the U.S. government, argued that most individual victims never got to vote on the plan.

Many plaintiffs and federal agencies have strongly opposed Johnson & Johnson’s third bankruptcy proposal. Specifically, the U.S. Department of Health and Human Services and the Department of Veterans Affairs warned that approving the deal would prevent the government from being reimbursed for medical expenses covered through Medicare, Medicaid and other public health programs for those injured by talcum powder. 

Furthermore, plaintiffs’ lawyers urged the court to reject the plan, arguing that it would unfairly block individuals from pursuing their lawsuits separately in civil court.

Judge Rejects Third Talcum Powder Bankruptcy Attempt

On March 31, Judge Lopez issued a Memorandum Decision and Order (PDF) rejecting the proposal, finding that the plan failed to meet the legal requirements of a bankruptcy settlement.

Although Johnson & Johnson claimed that more than 75% of plaintiffs supported the deal, the court found this figure misleading. Judge Lopez pointed out that many actual claimants were never given the chance to vote on the proposal. Instead, some law firms had agreed to the terms on behalf of their clients without directly informing them or getting their input.

“Votes are a quintessential part of plan confirmation. Votes are voices,” Judge Lopez wrote. “But the Court did not get to hear from tens of thousands of them.”

He also indicated that the plan included “impermissible nonconsensual third-party releases,” noting that plaintiffs were not allowed to opt out or opt in to these releases, even if they voted against participating in the bankruptcy settlement. Judge Lopez determined that the plan would have funneled potential liability to hundreds of retailers and a now-unaffiliated spin-off company named Kenvue.

“Red River’s expert witness and its Chief Legal Officer also confirmed that the plan is not feasible without including retailers in the channeling injunction,” Judge Lopez noted. “The plan was heavily negotiated, achieves potential finality, and enjoys significant support. But it cannot be confirmed.”

Ultimately, Judge Lopez said there was no way to confirm that the majority of plaintiffs approve of the plan, and that it is impossible to certify their votes. He also determined that the only way the settlement plan would have worked was to suddenly include hundreds of retailers who had not been involved in the litigation previously.

On the same day, Johnson & Johnson issued a press release denouncing the decision and indicating that it plans to return to the courts in an attempt to have tens of thousands of claims thrown out, despite numerous failures in the past to do so, essentially claiming that it has been targeted by a conspiracy theory involving law firms and the Courts.

Judge Lopez estimated that about 10 talcum powder cancer lawsuit trials would be held per year, indicating it would take 9,000 years for the court system to address them all.