(Bloomberg) -- Johnson & Johnson’s third effort to end lawsuits claiming its baby powder caused thousands of women to get cancer should be dismissed because it violates US Supreme Court precedent and twists the purpose of the American bankruptcy system, holdout creditors said in court papers.
The health-care giant can’t force women with ovarian cancer to join a proposed, $8 billion settlement under a ruling earlier this year by the top US court, lawyers who have long fought J&J argued. In June, justices voted 5-4 to reject the attempt by drugmaker Purdue Pharma to impose a $6 billion deal on holdouts opposed to an agreement that would have ended years of addiction claims related to the opioid epidemic.
The company will be in court Monday afternoon seeking to halt all court action outside of a Chapter 11 bankruptcy case filed last week by Red River Talc, the unit J&J created to dispose of tens of thousands of lawsuits that claim baby powder once contained talc tainted with toxic substances.
Most of the more than 62,000 baby powder cancer suits filed so far have been gathered before a federal judge in New Jersey for pre-trial information exchanges. Lawyers for Red River will seek to put those cases on hold while the bankruptcy case plays out.
The new insolvency case is J&J’s latest attempt to use special bankruptcy rules that allow corporations facing financial turmoil to force an end to all product-liability lawsuits. The rules require the company to win more than 75% of a vote by alleged victims and to set up a trust fund to pay claims. In return, all current and future lawsuits would be channeled through the trust, instead of fought in court and decided by juries.
Johnson & Johnson says it has overwhelming support for the roughly $8 billion settlement. Because 83% of alleged victims voted for the deal, Red River Talc qualifies for the special rules, the company argues.
The same lawyers who successfully defeated J&J’s first two attempts to use bankruptcy have asked Judge Christopher Lopez to throw out the new case as well. The opponents, including attorneys from the law firms Brown Rudnick LLP and Otterbourg PC, also claim that J&J rigged the victim vote by including women with gynecological cancers that cannot be linked to tainted baby powder.
The company “bought the votes of the holders of these negative value, non-compensable claims by offering a $1,500 Quickpay payment,” the holdouts said in a court filing.
The Purdue ruling does not prevent Johnson & Johnson from using bankruptcy because the baby powder claims involve alleged asbestos poisoning. Decades ago US lawmakers added rules to the bankruptcy code to help companies facing asbestos lawsuits. Those rules have been upheld by the US Supreme Court and can benefit Johnson & Johnson, the company said in statement.
The company also disputed claims that the voting was flawed, calling the allegations “disingenuous.”
Over the past 15 years, juries have awarded billions of dollars in damages to people who blame fatal cancers like ovarian and mesothelioma on J&J’s powder. Some of those verdicts were later overturned on appeal. The company has struggled to reach a so-called global out-of-court settlement with some victims and put an end to the suits.
J&J has said its talc-based powders never caused cancer and it appropriately marketed its now-withdrawn talc-based baby powder for more than 100 years. Last year, the company discontinued the talc-based version of the product and replaced it with a cornstarch-based substitute across the globe.
The bankruptcy case is Red River Talc LLC, 24-90505, US Bankruptcy Court for the Southern District of Texas (Houston).
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