By Mike Spector and Dietrich Knuth
(Reuters) – Johnson & Johnson plans to pay an additional $1.1 billion to settle tens of thousands of lawsuits alleging that the company’s baby powder and other talc products cause cancer, two people familiar with the matter said.
Johnson & Johnson said Wednesday it has reached an agreement with plaintiffs’ attorneys representing 12,000 customers to recommend a settlement offer to them, adding to support it has already received from other claimants.
The health care giant is preparing to file for bankruptcy at one of its subsidiaries to complete the proposed settlement before the end of this month, one of the people said. Johnson & Johnson will continue to operate without filing for Chapter 11 bankruptcy. The company maintains that its talc products are safe and do not cause cancer.
The timing of the bankruptcy declaration may change depending on how additional votes are counted.
Johnson & Johnson said Allen Smith, the plaintiffs’ attorney who is now supporting its plan, has agreed to the settlement offer in exchange for “additional cash and non-cash benefits to all talc claimants” in the bankruptcy plan it expects to be approved by a judge at a later date.
Johnson & Johnson declined to comment on how much additional money it plans to pay, and did not respond to a query about the timeline for a subsidiary to file for bankruptcy protection.
Earlier this summer, the company gave talc claimants until July 26 to vote on the proposed bankruptcy settlement. In August, the company granted claimants more time at the request of plaintiffs’ attorneys, including Smith, the company said.
The company’s current settlement offer “is the best and most realistic option available to claimants to recover their claims in a timely manner,” Smith said in a press release from Johnson & Johnson on Wednesday.
Johnson & Johnson expects to win support from more than 75 percent of the claimants who allege that its talc made them sick, thanks to the votes of Smith’s customers. Support from 75 percent of claimants is the minimum required by law to approve the company’s proposed bankruptcy settlement. The company said the additional votes would put the company “well above that threshold.”
Johnson & Johnson faces lawsuits from more than 62,000 plaintiffs, according to a filing the company filed. But that number rises to 100,000 when you factor in plaintiffs who haven’t filed lawsuits, according to Eric Haas, vice president of global litigation at Johnson & Johnson.
Some lawyers representing cancer victims oppose Johnson & Johnson’s plan to resolve the lawsuit, and are locked in a bitter battle with the company.
Andy Birchfield, one of the leading dissenters, said his law firm shares representation with Smith on a “large number” of clients through a joint agreement. Those clients have already “overwhelmingly rejected” Johnson & Johnson’s settlement offer, he said, and Birchfield will continue to oppose the company’s bankruptcy plan along with other lawyers.
Johnson & Johnson previously described its settlement offer as having a net present value of about $6.48 billion, with an actual cash payment of $8 billion over 25 years. The increase in Johnson & Johnson’s planned payment brings the latter figure to more than $9 billion.
After being twice rejected by federal courts, Johnson & Johnson is again trying to end its talc lawsuit in what’s called a “Texas two-step” bankruptcy.
The two-step maneuver involves offloading its talc liability to a newly created subsidiary, which then files for Chapter 11 bankruptcy. The goal is to use the process to force all claimants into a single settlement without having to declare bankruptcy for Johnson & Johnson itself.
Johnson & Johnson’s latest settlement offer addresses allegations that talc causes ovarian cancer and other gynecological cancers, which make up the bulk of the claims the company faces.
The lawsuit excludes other claims, including those brought by plaintiffs who allege that asbestos-laced talc caused them to develop mesothelioma, a deadly cancer that attacks the thin layer of tissue that covers many internal organs. Johnson & Johnson says its talc does not contain asbestos.