Johnson & Johnson (J&J) has taken yet another legal step in its ongoing efforts to resolve the avalanche of lawsuits over its talc-based products. For the third time, a subsidiary of the company has filed for bankruptcy in an attempt to settle claims tied to allegations that J&J’s talc products—most notably its baby powder—caused cancer due to asbestos contamination. With this third filing, J&J is looking to secure an $8 billion settlement that would address the over 62,000 lawsuits it faces.
This latest bankruptcy filing by Red River Talc, a J&J subsidiary, was made in the U.S. Bankruptcy Court for the Southern District of Texas. The company is navigating an extremely complex legal landscape, where claimants allege that long-term exposure to J&J’s talc-based products resulted in ovarian cancer and other serious health issues. While J&J maintains that its talc products are safe and free from asbestos, the company has been embroiled in years of litigation. This third attempt at bankruptcy reflects its efforts to find a more definitive legal solution.
What is the “Texas Two-Step” Bankruptcy, and Why Is J&J Using It?
J&J’s legal team is deploying a unique bankruptcy strategy colloquially known as the “Texas two-step.” This maneuver, controversial and highly criticized by many, involves a corporate restructuring tactic where a company creates a new subsidiary specifically to handle liability. In this case, J&J transferred its talc-related liabilities to Red River Talc, the new subsidiary, which then filed for Chapter 11 bankruptcy.
Under this strategy, J&J aims to protect itself from direct liability, while pushing all plaintiffs into a single, global settlement process overseen by the bankruptcy court. The company itself doesn’t need to file for bankruptcy, avoiding the broader consequences of such a move while still attempting to limit its financial exposure from these lawsuits.
J&J’s third attempt to use this legal strategy follows two previous efforts that were rejected by federal courts. In those earlier cases, the courts ruled that the company could not offload its liability in such a manner. However, J&J is hopeful that this latest approach will finally bring an end to the litigation.
Support From the Claimants
One key factor differentiating this third bankruptcy filing from the previous two is the level of claimant support for J&J’s proposed settlement. According to J&J, around 83% of current claimants have backed the $8 billion settlement offer. For the bankruptcy court to approve a global settlement that resolves all lawsuits, J&J needs at least 75% of claimants to agree to the terms. The company believes that this majority support will increase its chances of getting the court’s approval for the settlement, which would cover individuals who claim that J&J’s talc products caused ovarian cancer and other cancers linked to asbestos exposure.
Global Settlement and the Role of Bankruptcy Courts
A major advantage for J&J in pursuing a Chapter 11 bankruptcy filing through its subsidiary is that the bankruptcy court has the power to enforce a global settlement. This means that if the court approves the plan, all current and future lawsuits related to J&J’s talc products would be halted, and no new claims could be filed. Without this bankruptcy route, J&J would continue to face lawsuits in various courts across the country, each with the potential for huge jury verdicts. Indeed, the company has already faced several multi-billion-dollar judgments in some of these cases.
By securing a bankruptcy settlement, J&J seeks to avoid future litigation and the possibility of more massive jury verdicts. Outside of bankruptcy, any settlements J&J reaches with some claimants would still leave room for others to file new lawsuits, keeping the door open to additional legal risks.
A Focus on Ovarian and Gynecological Cancer Claims
Another critical difference in this third bankruptcy filing is that the settlement proposal now primarily focuses on claims related to ovarian cancer and other gynecological cancers. This narrow focus comes after J&J previously settled claims with state attorneys general and individuals who had developed mesothelioma—a rare cancer linked to asbestos exposure. The shift in focus indicates a strategic move by J&J to limit the scope of the lawsuits and concentrate its financial efforts on settling the claims with the highest volume of plaintiffs.
Opposition and Legal Hurdles
Despite the claimant support, J&J’s third attempt to use bankruptcy to resolve its talc-related lawsuits has not been without its share of opposition. Lawyers representing many of the claimants have been vocal in their criticism of the strategy, accusing J&J of attempting to avoid full responsibility for the harm allegedly caused by its products. They argue that J&J, being a financially stable company, should not be allowed to use bankruptcy protections designed for companies in genuine financial distress.
Moreover, J&J’s strategy faces significant legal challenges. These include a recent ruling from the U.S. Supreme Court in a case involving Purdue Pharma’s bankruptcy, as well as earlier court orders dismissing J&J’s previous bankruptcy efforts. In addition, there is proposed federal legislation that could prevent financially sound companies like J&J from benefiting from bankruptcy protections to resolve large-scale liability cases. This legislative effort aims to prevent companies from using bankruptcy as a shield from lawsuits, especially when they are not facing genuine financial peril.
What Lies Ahead for J&J and the Claimants?
J&J’s third bankruptcy filing represents yet another chapter in the lengthy legal battle surrounding its talc-based products. While the company has managed to secure significant claimant support for its $8 billion settlement offer, the outcome of this third attempt remains uncertain. The bankruptcy court will have to weigh the merits of J&J’s proposal, and it is possible that additional legal obstacles could arise.
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