Johnson & Johnson faced a significant setback this week as a court rejected the company’s attempt to settle thousands of lawsuits related to its talc-based baby powder. This decision sent J&J’s shares tumbling by 5.6%, marking the steepest drop since March 2020.
The ruling means that J&J now has to deal with approximately 60,000 claims from women who allege that the company’s baby powder caused ovarian cancer and other serious health issues. Analysts warn that this number could rise to over 90,000 claims, potentially costing the company around $11 billion in settlements.
Samir Parikh, a law professor at Wake Forest University, noted that this unexpected ruling is troubling for both J&J and its investors. The company had hoped to resolve these claims through bankruptcy, which would have allowed it to handle all lawsuits at once rather than facing them individually in various courts. However, U.S. Bankruptcy Judge Christopher Lopez dismissed the bankruptcy of a J&J subsidiary, Red River Talc, citing flaws in the voting process among cancer victims regarding the proposed settlement.
J&J had made several attempts to settle the claims through bankruptcy, but previous efforts were also rejected in federal courts. The current situation forces the company to return to the legal battleground and fight these claims case by case. Erik Haas, J&J’s vice president of litigation, expressed confidence in their position as they prepare for trial.
Critics have long argued that J&J’s bankruptcy strategy was a way to avoid full accountability for the alleged harms caused by its products. Andy Birchfield, an attorney representing some of the plaintiffs, stated that the court’s decision confirms their view that J&J’s actions were an attempt to sidestep responsibility.
The women suing J&J claim that the talc in the baby powder was contaminated with asbestos, a known carcinogen. Although J&J denies these allegations, it stopped selling talc-based baby powder in the U.S. back in 2020.
As the legal battles continue, J&J’s strategy and its implications for the company and the affected individuals remain in the spotlight. The outcome of these cases could have significant financial and reputational repercussions for the healthcare giant.