A subsidiary of Johnson & Johnson filed for bankruptcy for the third time on Friday as the healthcare giant strives to push forward an approximately $8 billion settlement to end tens of thousands of lawsuits alleging that its baby powder and other talc products caused cancer.
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This latest bankruptcy filing was made by J&J’s Red River Talc unit in the U.S. Bankruptcy Court for the Southern District of Texas. Johnson & Johnson faces more than 62,000 lawsuits from claimants alleging that its talc products were contaminated with asbestos and caused cancers, such as ovarian cancer.
J&J has consistently denied these allegations, asserting that its products are safe. However, after being twice rejected by federal courts, Johnson & Johnson remains undeterred and continues to pursue the “Texas two-step” bankruptcy strategy to halt the lawsuits.
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J&J stated that the Red River unit filed for bankruptcy after securing support from about 83% of current claimants for the proposed bankruptcy plan.
The “Texas two-step” strategy involves transferring all talc-related liabilities to a newly created subsidiary, which then files for Chapter 11 bankruptcy—a type of bankruptcy involving the reorganization of assets and debts under court supervision. The aim of J&J is to force all plaintiffs into a single settlement, without requiring the parent company itself to declare bankruptcy.
Bankruptcy judges have the authority to enforce global settlements that permanently stop all related lawsuits and prevent new ones from being filed.
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Outside of bankruptcy, any settlement J&J reaches with some claimants would still leave holdouts or future plaintiffs with the right to sue—leaving the company exposed to potential multibillion-dollar verdicts, a key reason why it adopted the two-step approach.
To bolster its chances in the third bankruptcy attempt, J&J asked plaintiffs to vote on the proposed deal in advance, ensuring it has enough support for the plan to succeed. J&J announced it has garnered more than the 75% of votes required for a bankruptcy judge to enforce the deal on all plaintiffs.
J&J’s third attempt at a bankruptcy settlement also differs partly from previous efforts as it focuses solely on ovarian and other gynecological cancer claims, building on its past settlements with state attorneys general and individuals who sued after developing mesothelioma, a rare cancer linked to asbestos exposure.
The company remains embroiled in a fierce battle with lawyers opposing its third attempt to settle the litigation through this maneuver.
Its bankruptcy strategy still faces significant legal hurdles, including a June U.S. Supreme Court decision involving Purdue Pharma’s bankruptcy, court orders dismissing its previous efforts, and proposed federal legislation aimed at preventing financially healthy companies like J&J from exploiting bankruptcy protection.
This battle is not just a legal dispute but an emotional narrative about consumer trust and the responsibility of a global brand.
