Shares of Johnson & Johnson (NYSE: JNJ) inches down in early trading session on Thursday as the JNJ division, cancer sufferers who reject the company’s offer to settle are seeking to coerce other claims into not ratifying a $8.9 billion settlement that will put an end to lawsuits over purportedly contaminated baby powder.
For the second time, the healthcare behemoth is attempting to rally support for a settlement deal that would resolve more than 40,000 cases alleging that baby powder included talc that was tainted with asbestos, a dangerous chemical, by using the bankruptcy of subsidiary LTL Management.
60,000 victims, or almost two thirds of all claims, have backed LTL, according to attorney Gregory M. Gordon, who testified in federal court on Tuesday. To have a chance of getting US Bankruptcy Judge Michael Kaplan to approve the purchase, the business needs reach 75%. According to Gordon, the holdouts are trying to prevent the business from achieving that objective.
Gordon stated that LTL and J&J will provide evidence as the bankruptcy process progresses to “show an aggressive, concerted effort by the plaintiff firms on this committee to scuttle this agreement through threats and intimidation directed at LTL, J&J” and plaintiffs who support the proposal.
The several law firms that are defending tens of thousands of women who allege they had cancer from baby powder have divided over the $8.9 billion agreement. A federal appeals court ordered that LTL’s initial attempt be dismissed, and detractors contend that J&J improperly forced LTL back into bankruptcy mere hours later.
“For people suffering and dying from cancer, most of the time it’s not about money,” Joseph D. Satterley, a lawyer opposing the transaction, said in court. Justice is at issue the majority of the time.
Lawyers opposed to the acquisition assert that J&J engaged in fraudulent transfer activity by pushing LTL back into bankruptcy and honing its legal strategies.
A fraudulent transfer occurs when a parent firm steals anything of value from a subsidiary during a bankruptcy, leaving the subsidiary with insufficient funds to pay its debts.
Critics assert that J&J attempted to force LTL to file for a second bankruptcy in this case by rescinding an arrangement that would have given LTL up to $61 billion to resolve the talc claims.
J&J disagreed with this legal view. The business also disputes the claims that its infant powder contained asbestos or was carcinogenic. The business has stopped selling its talc-based baby powder.
Legal experts believe J&J’s most recent plan is hazardous because it depends on changing the specifics of the first LTL bankruptcy and resubmitting the application right away.
J&J must overcome any fresh legal challenges from opponents who claim the second case is equally faulty as the first and convince 75% of all victims to vote in favor of the settlement in order to overcome two significant obstacles.
J&J claims that because they have the backing of a lot more cancer patients, this time is different. The corporation also changed its initial vow to help LTL financially to a significantly smaller pledge. The business claimed in court documents that this modification renders LTL insolvent and enables it to declare bankruptcy once more.
After forcing LTL into bankruptcy in 2021, J&J persuaded Kaplan to postpone all talc cases and force victims to participate in court-supervised mediation within a few months.
