J&J Subsidiary Files for Bankruptcy to Advance $8 Billion Talc Settlement

Johnson & Johnson's subsidiary, Red River Talc, has filed for bankruptcy for the third time, aiming to push through an $8 billion settlement. This move seeks to resolve over 62,000 lawsuits claiming the company's talc products, including baby powder, caused cancer. J&J denies these allegations, maintaining product safety.

The "Texas two-step" bankruptcy strategy involves transferring talc liabilities to a new subsidiary, which then files for Chapter 11. This method aims to consolidate all claims into one settlement without J&J itself declaring bankruptcy. Bankruptcy courts can enforce global settlements, halting all related lawsuits.

J&J's previous attempts were rejected, but this third effort has secured support from 83% of current claimants. The company needs 75% approval to enforce the deal. This round focuses solely on ovarian and gynecological cancer claims, differing from earlier, broader settlements.

Legal challenges persist. The June U.S. Supreme Court decision on Purdue Pharma's bankruptcy, previous court dismissals, and proposed federal legislation could hinder J&J's strategy. The company remains in a bitter dispute with opposing lawyers.

Explanation:

• Chapter 11 Bankruptcy: A type of bankruptcy involving reorganization of assets and debts under court supervision.
• Texas two-step: A legal maneuver where a company transfers liabilities to a subsidiary, which then files for bankruptcy to settle claims.