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Johnson & Johnson (J&J) said it will appeal to the U.S. Supreme Court after the 3rd U.S. Circuit Court of Appeals on Wednesday rejected the multinational pharma and consumer products company’s bid to dismiss tens of thousands of lawsuits over baby powder and other talc-containing products, the Wall Street Journal reported.
According to Reuters, the lawsuits — more than 38,000 in all — allege J&J’s baby powder and other talc products contained asbestos, which has been linked to the onset of ovarian cancer and mesothelioma, a type of cancer that occurs in the thin layer of tissue that covers most internal organs.
The company has repeatedly denied these allegations.
J&J, the developer of the Janssen COVID-19 vaccine, sought to use a legal maneuver commonly known as the “Texas two-step” in an attempt to sidestep the lawsuits, shifting liability to a subsidiary company, LTL Management, which then declared bankruptcy.
Johnson & Johnson said that it would seek #SCOTUS review on its strategy to address tens of thousands of lawsuits over its talc products in bankruptcy court, after a US appeals court rejected its request for rehearinghttps://t.co/eecWuGuZ3D pic.twitter.com/dpvYoHRBtL
— Reuters Legal (@ReutersLegal) March 22, 2023
The “Texas two-step” strategy previously was used by asbestos companies — most notably a subsidiary of Georgia Pacific known as Bestwall, owned by Koch Industries — in similar attempts to avoid liabilities from pending lawsuits.
According to Fierce Pharma, J&J established LTL Management in Texas before moving the company to North Carolina. LTL then declared bankruptcy, freezing the pending lawsuits for 17 months while J&J earmarked corporate monies for LTL to resolve the lawsuits.
As previously reported by The Defender, J&J attempted to take advantage of Texas’ “divisive merger” law, which allows for the execution of the “Texas two-step” strategy. If successful, the strategy would result in lower payouts for cases that do not settle beforehand.
In November 2021, U.S. bankruptcy judge Michael B. Kaplan issued an injunction pausing all talc litigation against J&J. However, plaintiffs challenged the ruling on the basis that neither J&J nor its shell subsidiary, LTL, needed bankruptcy protection as they were not in “financial distress.”
In January, the 3rd U.S. Circuit Court of Appeals in Philadelphia agreed with the plaintiffs, ruling that LTL’s bankruptcy bid should be dismissed.
Judge Thomas Ambro said in his ruling that J&J had more than $400 billion in equity value, an AAA credit rating, $31 billion in cash and marketable securities, and had distributed more than $13 billion to shareholders in 2020 and 2021.
Moody’s credit rating agency encouraged J&J to try the “Texas two-step” strategy, assuring the company that its AAA credit rating would be unaffected.
J&J then submitted an en banc appeal to the 3rd Circuit, asking the court to reconsider its decision. However, a three-judge panel on Wednesday unanimously rejected the bid.
In the interim, Kaplan said in February that he was prepared to end LTL’s bankruptcy proceedings once the 3rd Circuit issues a formal mandate of its January decision.
According to lawyers representing the plaintiffs, this would allow the pending lawsuits to proceed, while “a significant number of new lawsuits … are also expected to be filed.”
Nearly 40,000 Americans who used J&J products diagnosed with ovarian cancer or mesothelioma
After Wednesday’s decision, J&J said it would ask the 3rd Circuit to pause the ruling to allow the company time to submit an appeal to the Supreme Court, Reuters reported.
Attorney David Molton of the Brown Rudnick law firm, which represents a group of plaintiffs known as the Talc Claimants Committee, remarked after Wednesday’s order:
“The Talc Claimants Committee is pleased with the 3rd Circuit’s order denying debtor’s petition for rehearing and rehearing en banc. …
“The 3rd Circuit’s order brings victims of J&J’s talc products one step closer to getting justice and having their day in court before juries of their peers.”
In another victory for the Official Committee of Talc Claimants, the U.S. Court of Appeals for the Third Circuit Court denied Johnson & Johnson subsidiary LTL Management’s bid to revive its controversial #bankruptcy case. Read the full announcement here: https://t.co/ijeS52biN9 pic.twitter.com/D5Yp0kItMW
— Brown Rudnick (@BrownRudnickLLP) March 23, 2023
Another attorney representing plaintiffs, Clay Thompson of the Maune Raichle Hartley French & Mudd law firm, told Fierce Pharma the 3rd Circuit “rejected J&J’s greed-fueled attempt at abusing the bankruptcy system to trample of the rights of its victims.”
And attorney Leigh O’Dell of the Beasley Allen Law Firm, also representing plaintiffs, said Wednesday’s ruling represented another step toward ending J&J’s “attempted abuse of the bankruptcy system,” adding:
“Finally, our clients will have the opportunity to present evidence to a jury that J&J knowingly exposed women to asbestos, talc fibers, and other known carcinogens through its talc products. The evidence is strong and so is our commitment to finally achieve justice. …
“The bankruptcy was a sham. So is the company’s claim that it’s seeking a fair and equitable resolution of these claims. … At every step, Johnson & Johnson has tried to intimidate women into accepting pennies on the dollar as compensation for the harm they’ve suffered.”
In a statement following Wednesday’s order, Johnson & Johnson said
“Today’s ruling ignores the facts established during the Bankruptcy Court’s trial regarding the appropriateness of LTL Management’s … formation and filing, as well as the company’s intention to efficiently resolve the cosmetic talc litigation for the benefit of all parties, including current and future claimants.
“We will immediately move for a stay of this opinion so we can seek review directly from the U.S. Supreme Court.”
J&J’s attempted “Texas two-step” strategy drew the ire of talc victims — and members of Congress.
Nearly 200 plaintiffs produced a video expressing their opposition to the company’s strategy, while Sen. Dick Durbin (D-Ill.), chair of the Senate Judiciary Committee, spoke out against the strategy in the Senate in February.
Durbin said, in part:
“In this case, the company tried to use a legal scheme known as the ‘Texas Two-Step.’ It’s an accurate name because it would have allowed J&J to dance around its obligations to consumers it harmed. And this is not a few people we’re talking about: This case concerns nearly 40,000 Americans who used J&J products and have been diagnosed with ovarian cancer or mesothelioma.
“The 3rd Circuit ruled that J&J’s shell company had not acted in good faith when it declared bankruptcy. And that is exactly right. The 3rd Circuit’s ruling is an important victory. But the tragic reality is: For some of J&J’s victims, it’s too little, too late.”
Safety concerns over talc products linger despite J&J’s denials
J&J continues to maintain that its talc products are safe and have been confirmed, through thousands of tests, to be free of asbestos, according to Reuters.
However, a Reuters investigation in 2018 found the company was aware of the presence of asbestos in its baby powder and other talc-containing products.
Despite the company’s reassurances, J&J stopped selling talc products in the U.S. and Canada in 2020 and plans to discontinue their sale globally this year. The company attributed its decision to discontinue the products to “misinformation” about their safety.
J&J has since switched to a cornstarch version of its baby powder in North America, in a move the company described as “a commercial decision.”
Yes! The Supreme Court on Tuesday rejected an appeal by Johnson & Johnson to reverse a $2.1 billion verdict for plaintiffs who claim the company’s talc powder products gave them ovarian cancer.
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— Robert F. Kennedy Jr (@RobertKennedyJr) June 3, 2021
Before the “Texas two-step” maneuver and subsequent bankruptcy filing, J&J already had been subject to $3.5 billion in verdicts and settlements. This included a 2018 Missouri ruling where 22 women who developed ovarian cancer were awarded $4.69 billion — later reduced to $2.1 billion following appeals.
J&J had claimed it did not receive a fair trial and appealed to the Supreme Court, where its efforts were rejected in 2021.
Ken Starr, the prosecutor famous for authoring the Starr Report which resulted in the impeachment of then-President Bill Clinton, represented the 22 women who sued J&J. Starr said the company could have switched to a cornstarch-based baby powder as early as 1973, but “were unwilling to sacrifice profits for a safer product.”
Numerous scientific studies going back several decades have established the presence of asbestos, a known carcinogen, in cosmetic talc and talc-based products.
For instance, according to a 2014 study published in the International Journal of Occupational and Environmental Health titled “Asbestos in commercial cosmetic talcum powder as a cause of mesothelioma in women”:
“Cosmetic talcum powder products have been used for decades. The inhalation of talc may cause lung fibrosis in the form of granulomatose nodules called talcosis.
“Exposure to talc has also been suggested as a causative factor in the development of ovarian carcinomas, gynecological tumors, and mesothelioma.”
And a paper published in 2019 in the Epidemiology journal — “Talc, Asbestos, and Epidemiology: Corporate Influence and Scientific Incognizance” — found that as early as 1971, J&J was aware of the presence of asbestos in its talc products, but blocked the publication of these findings.
J&J is no stranger to lawsuits and legal controversy concerning its products. Hundreds of millions of doses of its COVID-19 vaccine produced at an Emergent Biosolutions plant in Baltimore were destroyed due to safety deficiencies.
A new FDA report said Emergent BioSolutions, which received millions in taxpayer funding, mixed up more doses of J&J and AstraZeneca vaccines than previously thought. The report also said the plant was too small, poorly designed and dirty. #TheDefenderhttps://t.co/W6DKF4ftUt
— Robert F. Kennedy Jr (@RobertKennedyJr) April 23, 2021
And as previously reported by The Defender, J&J has faced several major lawsuits for faulty or deficient products and for fraudulent practices, including:
- 1995: A $7.5 million fine for destroying documents to cover up an investigation into wrongful marketing of its Retin-A acne cream to remove wrinkles.
- 1996: An undisclosed settlement on false claims over condom protection against HIV and other STDs.
- 2001: An $860 million settlement in a class action lawsuit for misleading customers about prematurely discarding its 1-Day Acuvue soft contact lens. J&J recommended they should be worn only once, although it was discovered the lenses were no different than the regular Acuvue lens that would last for two weeks.
- 2010: An $81 million settlement for misbranding its anti-epileptic drug Topamax to treat psychiatric disorders and hiring outside physicians to join its sales force to promote the drug for unapproved conditions. The following year, J&J paid $85 million for similar charges against its heart drug Natrecor.
- 2010-2011: A $70 million penalty for paying off officials in Greece, Poland and Romania to advance its product sales. An executive with J&J subsidiary DePuy was sentenced to a year in prison for corrupt payments to physicians in Greece’s national healthcare system.
- 2011: Several J&J baby products were discovered to contain carcinogenic ingredients.
- 2013: The U.S. Justice Department charged the company $2.2 billion in criminal fines for marketing its autism and antipsychotic drug Risperdal for unapproved uses. Forty-five states had filed civil lawsuits against J&J in the scandal. Other serious adverse effects from Risperdal reported by the FDA include diabetes mellitus, hyperprolactinemia, somnolence, depression, anxiety, psychotic behavior, suicide and death.
- 2013: J&J paid nearly $2.5 billion to compensate 8,000 recipients for its flawed hip implants. In 2016, another $1 billion was awarded to plaintiffs injured by this device.
- 2019: A Philadelphia jury ordered J&J to pay $8 billion in punitive damages to a Maryland man, whose lawyers argued the company illegally marketed the antipsychotic drug Risperdal and downplayed the side effect that young men using it could grow breasts. Other suits include litigation over its blood thinner Xarelto’s risks of internal bleeding and a $775 million settlement to 25,000 plaintiffs.
- 2020: Four companies, including J&J, reached a $26 billion settlement with counties and cities that sued them for damages related to the opioid epidemic in the largest federal court case in American history.
- When J&J’s Motrin IB caplets were discovered to not properly dissolve, J&J hired outside contractors to buy up store supplies in order to cover it up. It took a Congressional investigation to expose the deception.