By Akiko Matsuda

A bankruptcy judge dismissed Johnson & Johnson's third attempt to resolve its mass talc liabilities through chapter 11, rejecting the company's latest bid to end one of the largest-ever mass torts.

Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston dismissed a J&J affiliate's chapter 11 case after finding the company used a flawed process to solicit votes from tens of thousands of personal-injury claimants. The judge's decision dealt a serious setback to the company's yearslong drive to achieve a resolution in chapter 11 of the mass lawsuits linking its iconic talc-based baby powder to cancer.

J&J has maintained that its talc products are safe and that a resolution in bankruptcy was in the claimants' best interests. The company didn't immediately respond to a request for comment Monday.

"This case has always been about fairness," said Adam Silverstein, a lawyer representing personal-injury law firms objecting to J&J's bankruptcy. "J&J tried to wear down victims through delay tactics, legal loopholes and backroom deals. Today's ruling shuts down that abuse and ensures that real people -- not corporate executives -- will decide what justice looks like."

Lopez's ruling followed a trial earlier this year on J&J's use of a legal maneuver known as a Texas Two Step to shift its talc-related liabilities to a subsidiary, which then filed for chapter 11 to move pending lawsuits against the company to bankruptcy court.

Bankruptcy opened a path for J&J to end all current and future lawsuits linking the talc products to ovarian and other gynecological cancers, a final resolution the company couldn't get anywhere else.

But its efforts to drive a settlement rankled some personal-injury lawyers and raised the fundamental question of whether as a solvent, multinational corporation it could access the protections of chapter 11, which are traditionally reserved for businesses that might not otherwise survive.

A pair of earlier bankruptcy cases filed by the company were each dismissed in New Jersey in 2023 after courts found that its LTL Management subsidiary wasn't in financial distress and therefore didn't qualify for the protections of bankruptcy. Last year, the company filed its third and latest case in Houston using a new unit called Red River Talc.

At trial earlier this year, J&J said that it had the support of 83% of those who had cast votes out of the roughly 93,500 injury claimants, exceeding the three-quarters threshold required under bankruptcy law.

Lopez found that irregularities in the voting process, including an "unreasonably short voting time for thousands of creditors," stemmed from the company's push to get to 75% support "at any cost."

Personal-injury law firms that rejected J&J's offer disputed the voting results, arguing that a key ballot was improperly cast on behalf of the victims of ovarian and other gynecological cancers. At least half of the votes cast "cannot count," Lopez ruled on Monday.

At the center of the voting dispute was Allen Smith, a Mississippi-based personal-injury lawyer and founder of the Smith Law Firm, who flipped roughly 12,000 no votes to yes, breaking with his co-counsel from the Beasley Allen law firm.

Under J&J's plan, an ovarian cancer patient would have received an average of $130,000 in compensation, while a claimant with other gynecological cancers would have received $1,500. The company argued in court filings that its offer would give claimants twice as much as they could ever hope to receive in the civil justice system, taking their claims to trial one by one.

Lonnie Boutwell, who lost his wife to ovarian cancer in 2016, said at the trial earlier this year the plan's compensation would be a "slap in the face" for victims and their families who suffered greatly. He would continue to fight for justice "until the day I die," he said.

Write to Akiko Matsuda at akiko.matsuda@wsj.com

(END) Dow Jones Newswires

March 31, 2025 21:04 ET (01:04 GMT)

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