Talcum Powder

The upcoming bankruptcy hearing on February 18, 2025, will be crucial in determining whether Johnson & Johnson’s proposed $10 billion bankruptcy plan can move forward. The company is using a controversial legal strategy called the Texas two-step, which aims to limit its liability for cancer claims while protecting its financial interests. 

Some victims support this approach for quicker compensation, while others argue it unfairly prioritizes the company’s needs over justice for those harmed. The hearing follows a significant Supreme Court ruling in Purdue Pharma’s bankruptcy, which could impact the legality of J&J’s plan. This case may lead to justice for many victims or result in further delays, with appeals potentially extending the legal battle.

As of December 3, 2024, the bankruptcy judge has decided to keep the baby powder lawsuits against Johnson & Johnson on hold until mid-March. This delay provides the company time to continue pursuing its bankruptcy strategy, which aims to resolve tens of thousands of injury claims permanently. 

During a recent hearing, the judge ruled against expanding the litigation freeze to include other entities allegedly involved, and also opted not to lift the block to allow some cases to proceed. Johnson & Johnson is proposing to settle the claims by paying over $8 billion through a corporate entity it created specifically for this purpose, which would file for bankruptcy and absorb the lawsuits.

On November 14, 2024, the U.S. Department of Justice, through the U.S. Trustee, raised objections to Johnson & Johnson’s choice of Jones Day as counsel for its subsidiary, Red River Talc LLC, in its bankruptcy case. The objection was based on a potential conflict of interest, as Jones Day was instrumental in developing the controversial “Texas Two-Step” strategy, which allows companies to create a subsidiary burdened with liabilities and file for bankruptcy, protecting the parent company’s assets from mass tort claims. This development raises questions about future regulatory oversight, especially with the potential shift in focus under a new administration, which might deprioritize aggressive intervention in corporate restructuring cases like this one.

In January 2025, a federal judge in Houston will decide whether to approve Johnson & Johnson’s bankruptcy plan, which aims to efficiently resolve the ongoing claims after previous failed attempts in New Jersey. Many plaintiffs are growing increasingly frustrated with the prolonged process.