In a significant legal setback for Johnson & Johnson (J&J), a federal judge in Houston has rejected the company's third attempt to resolve thousands of lawsuits alleging that its talc-based products caused cancer. US Bankruptcy Judge Christopher Lopez dismissed the proposed $9 billion settlement, citing numerous procedural flaws and a lack of sufficient support from plaintiffs, forcing J&J to abandon its bankruptcy strategy and return to the traditional court system.

The proposed settlement, which aimed to resolve over 90,000 claims, was intended to provide a comprehensive resolution to the ongoing litigation surrounding J&J's talc products, including its popular baby powder. However, Judge Lopez's ruling pointed to critical deficiencies in the plan, notably, issues involving voting irregularities and improper legal releases that would have shielded third parties from liability. The judge also criticized the limited timeframe provided to creditors for voting, deeming it “unreasonable.”

This latest rejection marks the third failed attempt by J&J to utilize the bankruptcy process to consolidate and resolve the multitude of lawsuits alleging a link between its talc products and cancer. The company’s strategy was to create a subsidiary, LTL Management, which then filed for bankruptcy, seeking to leverage bankruptcy court protections. However, courts have repeatedly pushed back against this maneuver, with prior rulings deeming it an improper use of bankruptcy to protect a solvent corporation from liability.

The legal battle stems from allegations that J&J’s talc-based products contained asbestos, a known carcinogen, and caused ovarian cancer and mesothelioma. Thousands of plaintiffs, primarily women, have filed lawsuits claiming that long-term use of J&J's baby powder and other talc products led to their cancer diagnoses.

In response to Judge Lopez's ruling, J&J announced that it will not appeal the decision and will instead focus on defending itself against the individual lawsuits in the tort system. The company maintains that the claims are “meritless” and “premised on junk science,” asserting the safety of its talc-based products.

J&J has set aside approximately $7 billion to address the talc litigation, funds that will now be redirected to fighting the individual cases. Erik Haas, worldwide vice president of litigation for J&J, stated that the company will aggressively defend itself, highlighting its previous success in defending ovarian cancer cases.

Despite discontinuing the sale of talc-based baby powder in the US in 2020, transitioning to a cornstarch-based formula, J&J continues to grapple with the extensive legal fallout. The company faces a substantial number of outstanding lawsuits, creating an uncertain financial and legal future. This ruling, pushes those lawsuits to the traditional court system, and may elongate the process for people seeking legal reparations.