Bankruptcy judge rejects J&J's talc baby powder related settlement plan

A US bankruptcy court judge has denied Johnson & Johnson's settlement plan related to baby powder containing talc, providing another setback in the company's efforts to resolve the matter.

This is the third bankruptcy case for a J&J company as it relates to the baby powder issue.

Red River Talc LLC, a J&J subsidiary, was seeking confirmation of a proposed prepackaged Chapter 11 bankruptcy plan that would have been one of the biggest mass tort settlements in history, if approved.

Red River and J&J proposed to pay USD 9 billion to settle ovarian cancer and other gynecological cancer litigation claims based on talc-related products.

But Judge Christopher Lopez of the US Bankruptcy Court for the Southern District of Texas, Houston division said in a court filing that J&J used a faulty voter solicitation process when dealing with personal injury claimants.

J&J said in a statement that it will not pursue an appeal, and instead will return to the civil law system to litigate and defeat these meritless talc claims. It will also reverse about USD 7 billion of a previous reserve.

The company said that it has settled 95 per cent of filed mesothelioma lawsuits, concluded all state consumer protection claims, and all talc-supplier disputes.

Last year a subsidiary of J&J proposed to pay approximately USD 6.48 billion over 25 years as part of a settlement in the US to cover allegations that its baby powder containing talc caused ovarian cancer.

The lawsuits filed against J&J had alleged its talcum powder caused users to develop ovarian cancer through use for feminine hygiene, or mesothelioma, a cancer that strikes the lungs and other organs.

The claims contributed to a drop in J&J's sales of baby powder, prompting the company to stop selling its talc-based products in 2020. In 2022, J&J announced plans to cease sales of the product worldwide.

J&J said at the time that the reorganisation plan for the subsidiary was significantly different from a previous reorganisation that was announced. The company said that the plan would resolve 99.75 per cent of all pending talc lawsuits against it and its affiliates in the US.

At the time, J&J said that the remaining pending personal injury lawsuits that relate to mesothelioma would be addressed outside of the plan.

Shares of J&J declined more than 3 per cent before the market open on Tuesday.