As reported in our February update on US talc-cancer litigation (here), on 13 February 2019, talc supplier, Imerys Talc America Inc., which had been a named co-defendant in most product liability claims involving Johnson & Johnson (J&J), filed for Chapter 11 protection in bankruptcy.
Under bankruptcy law, legal entities can set up a trust to manage current and future litigation. Proceedings may be heard under a single judge and may be transferred from a state court to a federal court, while claimants may also be pressured into accepting lower settlement offers.
Manufacturer of Johnson’s Baby Powder and Shower to Shower products, J&J, is facing more than 14,000 talc-cancer claims. The company has not filed for Chapter 11 bankruptcy protection and would not ordinarily have the same entitlements as the American subsidiary of Imerys SA.
In the 2017 case of Bristol-Myers Squibb Co. v Superior Court, the US Supreme Court ruled that claims filed in a state with a weak connection between the claimant’s claim and a company’s alleged conduct, may fail on jurisdictional grounds.[i]
Following this decision, on 6 September 2017, New Jersey District Court Judge, Freda Wolfson, made an order (here), allowing more than 11,000 claimants to re-file their talc-cancer claims in consolidated New Jersey federal court proceedings,[ii] with a view to avoiding potential jurisdictional challenges.
Now, J&J is attempting to apply a unique bankruptcy law provision, which enables ‘Imerys creditors with significant financial ties’ (they are in disagreement over $2 billion in insurance coverage and litigation-related indemnity agreements) to request that 2,400 other talc-cancer lawsuits should be heard by Bankruptcy Judge Laurie Selber Silverstein, in Delaware federal court, for ‘prompt, fair and complete resolution’ of claims.[iii]
Court papers, filed on Thursday of last week,[iv] argued that these claims should be concentrated ‘because the claims raise common questions of fact, law, and science,’ therefore meaning that pre-trial information exchanges are ‘duplicative, unpredictable, and wasteful’.
Incidentally, J&J has had much less success at state court level, especially in Missouri, where 22 former talc users with ovarian cancer were awarded $4.7 billion in a jury verdict, last year.
Should J&J succeed in its attempted exercise of the creditor-vested loophole, its challenge of the $4.7 billion verdict would not fall within the consolidated Delaware litigation, as the court filing is not seeking to bring together cases that have already gone to trial, are in the jury-selection process, or are on appeal.
However, a successful court filing, in this instance, could foreseeably result in more defended claims at federal court level, which would likely have an impact on corporate solvency, shareholder sentiment, scientific consensus and the willingness for UK claimant firms to invest in talc-related disease marketing (claims brought by UK residents are still brought in the US).[v]
[ii] In Re: Johnson & Johnson Talcum Powder Products Marketing, Sales Practices, And Products Liability Litigation, MDL No. 2738.
[iii] ‘J&J Tries to Use Supplier’s Bankruptcy to Gather Talc Suits’ (18 April 2019 Bloomberg) <https://www.bloomberg.com/news/articles/2019-04-18/j-j-aims-to-use-supplier-bankruptcy-to-fight-2-400-talc-lawsuits> accessed 23 April 2019.
[iv] In Re Imerys Talc America Inc., 19-00103, U.S. District Court & 19-10289, U.S. Bankruptcy Court.
[v] Andrew James, ‘Health issues associated with talc and legal compensation in the UK’ (5 July 2018 Hodge, Jones & Allen) <https://www.hja.net/health-issues-associated-with-talc-and-legal-compensation-in-the-uk/> accessed 25 April 2019.