By Andrew Scurria, Erin Mulvaney and Alexander Gladstone | Photos by Micah Green for WSJ
Johnson & Johnson is closing in on one of the largest settlements of mass-tort lawsuits in history. Its strategy is to divide and conquer the trial lawyers.
The healthcare-products company is nearing a resolution of the long-running lawsuits over its talc products, offering a settlement to roughly 100,000 women who allege the company's iconic baby powder caused them to develop gynecological cancers. If J&J wins enough of their support, it will try to use a bankruptcy filing to carry out its settlement plan, worth roughly $8 billion over time.
A bankruptcy could settle all current and future talc claims against the company, a global resolution it can't get any other way. J&J's plan depends in part on winning votes from talc plaintiffs with relatively weak cases to help upend higher-value lawsuits, shield the company from facing jury trials and speed up payments to cancer patients.
To deliver the votes, the company is counting on support from personal-injury firms that signed up tens of thousands of talc clients with the help of lead-generation companies and lawsuit advertising. J&J is polling talc claimants through July 26 on its plan. Most law firms with talc cases are backing the plan, while a minority are vehemently opposed.
J&J needs to win three-quarters of the vote for its plan to qualify under bankruptcy law for court approval. A company representative said it fully expects to win the vote, as shown by its backing from plaintiffs' firms.
"If you take the number of cases who are represented by clients who have pledged to support our agreement, we're there," said Kris Hansen, a bankruptcy lawyer who represents law firms that support the plan.
Under the plan, J&J would cap its exposure to the strongest talc-related claims, particularly for ovarian cancer. It would grant small, guaranteed payouts for those with other gynecological cancers whose claims may not pass muster in court. J&J would avoid the cost of defending each lawsuit individually for decades to come and the risk of big jury-trial verdicts.
The company denies that its talc was ever unsafe, but is offering roughly $8 billion in compensation over time to resolve its talc liabilities, which would be one of the largest-ever settlements of a mass tort. It would provide flat $1,500 payments to talc users who developed gynecological cancers such as uterine, cervical, vaginal or vulvar cancer. Some law firms that support the plan have thousands of gynecological-cancer claims that may receive no compensation otherwise.
The plan also covers those with ovarian cancer, most of whom would collect between $75,000 and $150,000 under the plan. Ovarian-cancer plaintiffs have a stronger case against the company based on medical literature and a 2021 jury finding linking the disease to talc.
Women who signed retainer agreements with law firms aren't required to follow their lawyer's advice on how to vote on the plan. But many do. Shawnnessy Webster, 53 years old, an endometrial-cancer survivor who owns an insurance business in Pensacola, Fla., voted for the plan on her lawyer's advice. She now worries that her vote could help J&J reduce its payments to other women, including those with ovarian cancer, she said in an interview.
In an email she wrote last month to another personal-injury firm, Webster said her lawyer told her that her claim had been closed in 2021 because of lack of conclusive evidence linking her cancer to talcum powder use. Webster voiced concerns that J&J is manipulating the vote by offering payments to claimants like her.
"Had I just unwittingly participated as a non-ovarian cancer claimant in the padding of a vote that needs to reach a collective 75% consensus for J&J to protect themselves with a bankruptcy settlement?" Webster wrote in her email, which was reviewed by The Wall Street Journal.
Webster's lawyer, Jim Onder, represented more than 21,000 talc claims as of last year and supports the plan. He said "the amount received by each claimant, both ovarian and non-ovarian, is reflective of the strength of the case and support in the medical literature." While research doesn't link talc as strongly to non-ovarian cancers, that "does not mean those claims are without support," he said.
"While no amount of money could ever be 'fair' given everything these women have experienced, the current offer is reasonable given the totality of the circumstances, and can help provide closure to the many who have been waiting over a decade for the financial help they desperately need," Onder said.
Bankruptcy benefits
If the plan is approved in court, even claimants who voted no would be bound by its terms. J&J would eliminate the risk of large jury-trial verdicts like the $2.1 billion judgment it paid to a group of 20 ovarian cancer plaintiffs in 2021.
Future claimants -- talc users who aren't currently sick but might develop cancer in the future -- also would be covered by the plan and barred from pursuing J&J in the civil justice system.
J&J and the law firms that back it have said its plan offers a far better recovery than almost all claimants could get at trial. Support for the plan among plaintiffs' firms is led by Mikal Watts, a trial lawyer famed for his leading roles in mass torts ranging from the Deepwater Horizon oil spill to the wildfires that swept California utility PG&E into bankruptcy.
Watts, who represents some 17,000 claimants, said he helped negotiate the plan with J&J because the decadelong talc litigation isn't a "recipe for access to judgment." The plan ensures that women get to vote on the company's offer and will be paid much faster, he said.
"We are losing thousands of plaintiffs a year to the graveyard," he said. "I think that's very unfortunate. Each of those women, who have now been buried, saw their lawsuit buried by this delay as well."
The opponents
J&J is betting that weaker gynecological-cancer claims will "overwhelm the vote of the true parties-in-interest," said personal-injury law firm Beasley Allen, the leading opponent of the plan, in a recent court filing. Beasley Allen's filing said it estimates that roughly half of the 100,000 claimants being asked to vote on the plan have ovarian cancer, while the other half have gynecological cancers that have no scientific link to talc.
"J&J is counting on cancer victims turning on each other," said Andy Birchfield, a lawyer with Beasley Allen. "They're counting on cervical cancer cases and uterine cancer claimants being willing to sell their vote and turn against ovarian cancer patients to get a few hundred bucks in their pocket."
The company has alleged that Beasley Allen and other firms aren't acting in their clients' best interests and only want to protect hundreds of millions of dollars in legal fees they could earn if the plan fails. Beasley Allen and other firms can collect up to 12% of any settlement with J&J for their work on a plaintiffs' steering committee -- but those extra payments wouldn't be available in a bankruptcy settlement.
Beasley Allen denies it is motivated by fees and has accused J&J of manipulating the vote with "Johnny-come-lately, watered-down claims" by "promising a swift payday for some opportunistic lawyers."
Birchfield is leading opposition to the plan along with trial lawyer Mike Papantonio, who said it could become a playbook for corporate defendants to use the bankruptcy process to avoid liability for selling dangerous products. Papantonio said his firm has close to 500 claims but that other firms with one or two lawyers have amassed thousands of talc claims by running ads on television.
It's common for plaintiffs firms to find clients through television, social media and radio spots, and spending in recent years has reached historic highs, thanks in part to big cases like the litigation against J&J, according to X Ante, a firm that specializes in research on mass tort advertising. Plaintiffs firms spent $121 million on television ads regarding the J&J talcum powder litigation to attract potential clients alone from 2012 to 2023, according to X Ante.
J&J complained for years that plaintiffs' lawyers and their financial backers were using mass advertising and junk science to gin up thousands of baseless claims. Ahead of the bankruptcy vote ads pushing for a yes vote on the bankruptcy deal started to appear in Google ads, television and YouTube.
A third try at bankruptcy
Despite its vast financial resources, the company has argued it should be able to settle its talc liabilities in bankruptcy because resolving mass lawsuits is a valid use of bankruptcy law. The plan calls for J&J to use the legal tools of chapter 11 to settle its talc liabilities without placing its business operations to bankruptcy. That is possible because the company assigned its talc-related liabilities in 2021 to a subsidiary called LTL Management that was specially designed to carry those lawsuits into bankruptcy court.
J&J then placed LTL in bankruptcy in Charlotte, N.C., to put the talc lawsuits on hold and try to drive a settlement in chapter 11. A federal appeals court dismissed that bankruptcy in early 2023 after finding that LTL wasn't financially distressed and didn't qualify for chapter 11. Watts and other tort lawyers then reached out to J&J to encourage the company to file another bankruptcy, this time with a settlement they could support, court papers show.
J&J placed LTL in bankruptcy a second time, touting a nearly $9 billion settlement with what it said was a majority of claimants. That second case, filed in New Jersey, was also thrown out. J&J is now preparing to steer its third filing to a bankruptcy court in Texas, where the legal landscape is more favorable.
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July 23, 2024 05:30 ET (09:30 GMT)
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