Federal Judge Rejects Cancer Victims' Bid to Block Johnson & Johnson Bankruptcy

On this past Friday, Federal Judge Michael Shipp carefully evaluated a request from a group of cancer victims to block Johnson & Johnson's bankruptcy plans, and ultimately rejected their motion. This decision paves the way for a more convenient bankruptcy resolution to handle tens of thousands of lawsuits alleging the company's talcum powder products contained cancer-causing asbestos.

Previously, on June 11th, the cancer victims had filed a preliminary injunction in New Jersey, seeking to prevent Johnson & Johnson from filing for bankruptcy outside of the state, in an effort to salvage a $6.48 billion settlement plan. This motion was part of the plaintiffs' lawyers' class action lawsuit against the settlement plan.

However, Judge Michael Shipp stated on Friday that he could not approve the motion, as the victims' injuries were "purely hypothetical." He emphasized that he lacked jurisdiction to resolve disputes arising from "events that have not occurred and may never occur."

As of late last Friday, the plaintiffs' lawyers had not immediately responded to requests for comment.

As part of the prepackaged bankruptcy plan, Johnson & Johnson is hoping to secure at least 75% support from claimants. The voting deadline for the plan is set for July 26th.

The healthcare conglomerate currently faces over 61,000 lawsuits from plaintiffs alleging their talcum powder products caused ovarian cancer or mesothelioma, a fatal cancer linked to asbestos exposure.

Johnson & Johnson maintains the safety of its talcum powder products, stating they do not contain asbestos and are not carcinogenic. The company argues the bankruptcy settlement will provide fair and equitable compensation to plaintiffs, avoiding the common inequities in the civil justice system where some plaintiffs receive no compensation while others receive vast sums.

Lawyers opposing the plan argue it is an attempt to defraud plaintiffs of the billions of dollars in company assets they are owed in rightful compensation.

Johnson & Johnson has previously attempted to execute bankruptcy strategies twice to resolve current and future talcum powder litigation, in a tactic known as the "Texas Two-Step." This involves creating a subsidiary to take on Johnson & Johnson's talcum powder liabilities, then having that subsidiary file for bankruptcy to resolve the cases. However, two courts have found Johnson & Johnson's subsidiaries lacked the necessary "financial distress" to legitimize the bankruptcy filings.

The company's plan focuses on resolving bankruptcy claims from women with ovarian cancer and other gynecological cancers allegedly linked to talcum powder. In addition to the bankruptcy plan, Johnson & Johnson has settled most mesothelioma cases and reached a separate $700 million agreement this month to resolve claims brought by state attorneys general.