Johnson & Johnson Considering Subsidiary Bankruptcy in Face of Talc Asbestos Lawsuits

The next chapter in the Johnson & Johnson asbestos saga is almost written.

It might be defined by one word: bankruptcy.

According to reports from the Wall Street Journal and CNBC, the pharmaceutical giant is considering moving its talc liabilities to a new company, which would immediately file for bankruptcy. Johnson & Johnson produces numerous health and beauty products, some of which include talcum powder to enhance skincare. This move would change the type of compensation available to cancer victims of Johnson & Johnson Baby Powder.

The most well‑known example is Johnson & Johnson Baby Powder, which is at the forefront of thousands of cancer lawsuits. The concern is the relationship between talcum powder, made from the mineral talc, and asbestos.

Update: Johnson & Johnson decided to file for bankruptcy after creating a new subsidiary. This move put mesothelioma lawsuits against Johnson & Johnson on hold.

 

Why Johnson & Johnson Faces Legal Issues Regarding Talc

Asbestos and talc form in similar geographical areas, which lends to the two mixing together. Since talc can contaminate talcum powder at trace levels with sharp fibers, it can make any use of talc products dangerous. Sharp asbestos fibers can enter the body and irritate tissue linings, causing cancer or other health concerns.

One of the possible outcomes is developing mesothelioma, a rare cancer caused only by exposure to these sharp asbestos fibers. Talc and mesothelioma is a health concern in part due to Johnson & Johnson’s use of talc in its products.

Johnson & Johnson has been strapped with mesothelioma lawsuits and other asbestos cancer claims for years. The company has lost quite a few lawsuits in trial, with courts handing down multi‑million‑dollar verdicts favoring victims of Johnson & Johnson’s negligence. Some of the verdicts favoring victims in Johnson & Johnson cancer claims include:

• $29.4 million in 2019 to a mesothelioma victim
• $4.7 billion in 2019 to 22 people
• $750 million in 2020 to a victim, which was lowered to $200 million due to New Jersey state law
• $40 million in 2019 to a California victim

Johnson & Johnson faces a growing number of talc cancer claims — approximately 30,000, according to reports. With the number increasing, Johnson & Johnson officials may hope to stall their completion and reduce payouts in future claims.

 

Why Johnson & Johnson May Turn to Bankruptcy

According to reports, which cited people familiar with ongoing legal claims, a Johnson & Johnson legal representative said during settlement discussions that one option is turning to Chapter 11 bankruptcy. The company would create a subsidiary of itself and saddle the new entity with all the parent company’s asbestos liabilities.

This maneuver is how companies can avoid lawsuits related to asbestos and mesothelioma cancer. Many businesses have taken this exact action since mesothelioma claims rose at the end of the 20th century.

The newly created businesses then file for Chapter 11 bankruptcy, a way to sidestep future lawsuits. Creating the subsidiary and filing for bankruptcy also halts current, unsettled claims with victims.

The U.S. court system ordered asbestos companies filing for Chapter 11 bankruptcy to create asbestos trust funds. These accounts provide financial compensation to victims of asbestos exposure. However, the funds often pay less to victims than lawsuit settlements would.

This move would not only sidestep mesothelioma claims but also ovarian cancer litigation. Asbestos fibers entering the body can also cause ovarian cancer and lung cancer.

 

History of Johnson & Johnson and Mesothelioma Lawsuits

Johnson & Johnson is a recent example of a corporate giant linked to mesothelioma. The company is accused of prioritizing profits by continuing the use of talc in products despite knowing of potential asbestos contamination.

In 2018, Reuters reported that Johnson & Johnson officials knew their talc products were unsafe. This was a major blow in any defense for the company against legal claims.

Despite company officials pledging the talc products are safe, science consistently proves this to be incorrect. Research consistently finds traces of asbestos in talc makeup, powders and more. Johnson & Johnson even recalled a batch of its Baby Powder product due to asbestos concerns.

A year ago, in 2020, the company stopped manufacturing and marketing talc versions of its Baby Powder product in the U.S. and Canada. This was a monumental decision, influenced by the victims of the company’s negligence.

In 2020, the company reportedly settled more than 1,000 asbestos talc legal claims. The company also set aside nearly $4 billion to resolve the remaining thousands of claims.