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By Brendan Pearson
(Reuters) – A federal judge on Friday rejected an attempt by a group of cancer victims 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 contained cancer-causing asbestos.
Cancer victims sought a preliminary injunction in New Jersey on June 11 to prevent Johnson & Johnson from filing for bankruptcy out of state, which would have effectively scuttled the $6.48 billion settlement plan. The motion was part of a class action lawsuit filed by plaintiffs’ lawyers 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.”
A lawyer for the plaintiffs did not immediately respond to a request for comment late Friday.
Johnson & Johnson hopes to enlist the support of 75% of bankruptcy claimants as part of its pre-arranged bankruptcy plan. It has set July 26 as the deadline for voting.
The health care company is facing lawsuits from more than 61,000 plaintiffs who allege that the company’s talc causes 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 and 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 execute a bankruptcy maneuver aimed at ending current and future talc-related lawsuits.
The strategy, known as the Texas two-step strategy, involves creating a subsidiary to absorb Johnson & Johnson’s talc liability, which then declares bankruptcy to resolve the issues. Two courts have previously found that Johnson & Johnson’s subsidiary lacks the “financial distress” necessary to make a bankruptcy filing legitimate.
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.
