U.S. Appeals Court Affirms Rejection of Johnson & Johnson’s Second Talcum Powder Bankruptcy Filing

Johnson & Johnson indicates it will appeal the talcum powder bankruptcy ruling to the U.S. Supreme Court, while continuing with a third attempted filing

A U.S. appellate court has affirmed a lower courts decision that prevented Johnson & Johnson from forcing the settlement of talcum powder cancer lawsuits through a second bankruptcy filing, saying that it was not proposed “in good faith.” However, the opinion comes as the company already has plans underway to pursue a third bankruptcy attempt.

Johnson & Johnson faces more than 60,000 Baby Powder lawsuits and Shower-to-Shower lawsuits brought by women diagnosed with ovarian cancer and other injuries, each raising similar allegations that the manufacturer failed to warn consumers about the future cancer risks from the talcum powder products.

Rather than attempting to negotiate settlements with those individual women, Johnson & Johnson has made two failed attempts to force the litigation into the U.S. bankruptcy system, by transferring all liability it owes for failing to warn into a new subsidiary, which then promptly filed for bankruptcy.

Despite the manufacturers efforts to side-step their liability being determined by juries, federal bankruptcy judges have rejected both efforts, noting that the parent company Johnson & Johnson faced no real financial distress from the litigation, and has sufficient assets to settle the claims.

While pursuing an appeal of the second filing, Johnson & Johnson proposed a third bankruptcy settlement in May 2024, including a $6.5 billion fund to resolve all current and future Baby Powder lawsuits involving women diagnosed with ovarian cancer, which makes up the bulk of litigation the company currently faces.

Once again, plaintiffs’ lawyers have again roundly rejected the effort, indicating that the amount of the settlement is insufficient to compensate women who relied on the safety of Johnson & Johnson talcum powder products, as well as future claims the company may face, and it is expected that any third filing will face furthe appeals.

Following the rejection of their second bankruptcy attempt, Johnson & Johnson filed an appeal with the U.S. Court of Appeals for the Third Circuit, which issued an opinion (PDF) on July 25 that upheld the lower court’s decision in that filing.

The company’s subsidiary, LTL Management, which Johnson & Johnson has tried to make liable for its talcum powder litigation costs, challenged the dismissal on several grounds, all of which the appeals court rejected, saying it saw no financial distress legitimate enough to require Chapter 11 bankruptcy protection.

“Again, we see no clear error in the Bankruptcy Court’s conclusion that, in the worst-case scenario, LTL’s assets exceed its liabilities,” the Third Circuit Appeals Court ruling states. “So we do not see insolvency-based financial distress on those facts.”

Johnson & Johnson has indicated it plans to appeal the decision to the U.S. Supreme Court, while it continues with the potential third filing.

Vote on Third Talcum Powder Bankruptcy Attempt

Company officials indicated that the ruling was expected, and does not deter the company’s third attempt, which it claims has the support of 75% of potential plaintiffs. However, opponents indicate the voting consistent largely of individuals with claims that can not be supported, and they should not be given equal votes to those of plaintiffs with the worst injuries that have been moving through the U.S. court system for each years.

While each of the two prior attempts to force all talcum powder lawsuits into the U.S. bankruptcy system failed, the controversial move has successfully delayed the litigation for the better part of three years, preventing large numbers of cases from being prepared for individuals trials to determine the amount of compensation the companies should be forced to pay for failing to warn about the talcum powder cancer risks.

Plaintiffs’ attorneys have argued that the delays are resulting in many women dying of cancer before their claims can go before a jury,  preventing them from receiving compensation they are owed for their injuries while they still live to benefit.

If the third bankruptcy attempt is also rejected, it is expected that the federal judge presiding over the litigation will move forward with a series of early bellwether trials to gauge how juries may respond to certain evidence and testimony that will be repeated throughout tens of thousands of claims.