Written by Brendan Pearson
(Reuters) – A federal judge on Friday rejected a group of cancer victims’ bid to block Johnson & Johnson from pursuing a proposed bankruptcy settlement of tens of thousands of lawsuits alleging that the company’s baby powder and other talc products contain cancer-causing asbestos.
On June 11, cancer victims filed for a preliminary injunction in New Jersey to prevent Johnson & Johnson from declaring bankruptcy outside the state, which would have effectively scuttled the $6.48 billion settlement plan. The request was part of a class-action lawsuit filed by attorneys for plaintiffs opposing the plan.
But U.S. District Judge Michael Shipp said Friday he could not grant the request because any harm to victims was “entirely hypothetical.” He said he did not have jurisdiction to resolve the dispute over “events that never happened, and may never happen.”
The plaintiffs’ attorney did not immediately respond to a request for comment late Friday.
Johnson & Johnson hopes to secure support from 75% of claimants as part of its pre-packaged bankruptcy plan. It has set a July 26 deadline for a vote.
The health care group is facing lawsuits from more than 61,000 plaintiffs who allege that its talc caused ovarian cancer or mesothelioma, a deadly cancer linked to asbestos exposure.
Johnson & Johnson insists that its talcum powder is safe, asbestos-free and does not cause cancer. The company claims that the bankruptcy settlement pays plaintiffs fairly and equitably, unlike the civil justice system in which most plaintiffs get nothing while some win huge payouts.
Plaintiffs’ lawyers opposing the plan say it is a fraudulent attempt to put billions of dollars in company assets out of the plaintiffs’ reach, preventing them from getting the compensation they deserve.
Johnson & Johnson has twice failed to pull off a bankruptcy maneuver aimed at ending current and future lawsuits over talc.
The strategy, known as the Texas Two-Step Strategy, involves creating a subsidiary to absorb Johnson & Johnson’s liability for talc, which then declares bankruptcy to resolve the issues. Two courts previously found that the Johnson & Johnson subsidiary lacked the necessary “financial distress” to legitimize a bankruptcy filing.
Johnson & Johnson’s plan focuses on resolving bankruptcy claims from women with ovarian cancer and other gynecologic cancers linked to talc. It has settled most of its mesothelioma cases outside of bankruptcy, and this month closed a separate $700 million agreement to resolve claims from state attorneys general.