US government moves to block J&J talc bankruptcy resolution

The US Department of Justice (DoJ) has filed a motion to dismiss Johnson & Johnson’s latest attempt to use the bankruptcy court to settle tens of thousands of lawsuits claiming its talc products caused people’s cancers.

In September, J&J announced that approximately 83% of claimants in current lawsuits supported its proposal to resolve ongoing and future lawsuits through bankruptcy proceedings of its subsidiary, Red River Talc, which was created explicitly for this purpose. This exceeds the 75% approval threshold required by US bankruptcy law to allow the deal to go ahead. However, the DoJ’s US Trustee Program (which oversees bankruptcy cases) is objecting.

‘For the third time in as many years, the Johnson & Johnson Company…seeks to use the bankruptcy process to immunize itself from billions of dollars of personal injury liability without actually subjecting itself to bankruptcy,’ stated Trustee Kevin Epstein in the filing. As another reason for throwing out the J&J deal, the filing cites the US Supreme Court’s decision in June to reject a similar bankruptcy by pharmaceutical company Purdue Pharma, which had aimed to resolve the billions of dollars in opioid claims the company was facing.

In the J&J case, the US Trustee’s 21 October motion calls the tactic ‘a textbook example of bad faith,’ arguing that J&J established Red River ‘for the specific purpose of serving as a bankruptcy vehicle’ and forging a settlement. Red River ‘has no need for bankruptcy relief and it had no valid restructuring purpose when it filed its bankruptcy petition,’ the US Trustee concludes. J&J has until the second week of November to respond to the filing and argue why the motion should be rejected.