J&J’s LTL Management unit filed a new Chapter 11 case to provide a basis for the trust, which outlines terms for settling the decade-long litigation. An earlier filing, which didn’t include a settlement, was rejected in January after an appeals court found J&J erred in using bankruptcy to block juries from hearing lawsuits and handing out damage awards. J&J wants a reorganization plan for LTL that caps all the talc liability.

“Resolving this matter through the proposed reorganization plan is both more equitable and more efficient, allows claimants to be compensated in a timely manner,” Erik Haas, J&J’s world-wide head of litigation, said in a release. Monies in the settlement will be paid out over 25 years.

Shares of J&J were up 3% in pre-market trading in New York.

If enough victims agree to join the accord, J&J will be freed from defending against cancer claims tied to baby powder and others products tainted by asbestos. Juries ruled against the company in nearly a dozen such suits over the years — including one appealed all the way to the US Supreme Court — before J&J was forced to pay $2.5 billion to a group of 20 women whose case went to trial in 2018.

Traces of Asbestos

Women and men blamed J&J’s 129-year-old baby powder for causing ovarian cancer and mesothelioma, a cancer specifically tied to asbestos exposure. Victims allege internal J&J documents dating back to the early 1970s show workers warning managers about traces of asbestos found in talc bottled for baby powder. The victims contend J&J executives should have warned consumers about the powders’ health risks.

“This is the largest products liability settlement ever realized after a bankruptcy filing,” said Mikal Watts, one of the plaintiff lawyers who negotiated the deal with J&J. “Our job is to get our clients restitution for their injuries, and this settlement is the culmination of over a decade of fighting for justice.”

J&J argues the talc cases pose a financial threat to the company despite its more than $478 billion market capitalization. That’s because juries could repeatedly hit J&J with multi-billion verdicts that threaten its financial health, its lawyers contend. The company also has suffered reputational harm tied to the talc findings.

J&J has been criticized for using the bankruptcy courts to foster a settlement. Such filings allow firms to put suits on hold while a judge evaluates their value. Getting court approval for such trusts requires 75% of victims to vote in favor of having their claims through that process.

Under the terms of the deal, J&J agreed to pay $6.5 billion to resolve current and future ovarian cases, provide $2 billion for current and future mesothelioma cases and hand over $400 million to states who’ve sued J&J for failing to warn consumers about the health risks tied to its talc-based powders or threatened to sue, according to people familiar with the deal who asked not to be identified because the details aren’t public.

Opposing Deal

J&J negotiated its new deal with lawyers outside the leadership group overseeing talc cases consolidated as a multi-district litigation (MDL) before a federal judge in New Jersey. Attorneys in the MDL said J&J isn’t putting up enough money and ridiculed its repeated attempts to use the bankruptcy process to deny victims trials.

“This second bad-faith bankruptcy is an attempt by J&J to bully cancer victims into accepting a low-ball deal that would leave most of them with staggering unpaid medical bills and lost wages,” Jason Itkin, a lawyer for claimants who oppose the deal, said in an email. “We believe this second bankruptcy will be dismissed just like the first one.”

In its January ruling, the appeals court said J&J wrongly put its newly created unit, LTL Management, under court protection to deal with the talc litigation. The three-judge panel found since J&J agreed to set up a more than $61 billion backstop plan for its unit, the company wasn’t in “financial distress” and didn’t qualify for protection.

Hours before the new case was filed, an official committee of talc claimants filed court papers arguing that a second Chapter 11 petition would be wrong. The group, which represented cancer victims in the first bankruptcy case, said the company should not be permitted to return to bankruptcy.

The new filing should satisfy demands by the appeals court that rejected the first case, lawyers who crafted both Chapter 11 filings for J&J argued in court papers. In the latest case, the firm replaced the backstop agreement with the $8.9 billion settlement, J&J’s lawyers said. The settlement funds will be LTL’s only financial resource, they said.

“I applaud Johnson & Johnson on finding a fair and equitable solution which closes a painful chapter for a lot of American women,” said Mark Lanier, a Texas-based lawyer who won a $4.7 billion verdict against the company in 2018 on behalf of 20 women who blamed their ovarian cancer on baby powder use.