The giant pharmaceutical company Johnson & Johnson (J&J) is facing thousands of personal injury claims from people who blame the company’s talc products for ovarian cancer and malignant mesothelioma. After previously filing two bankruptcy claims and both claims being rejected by victims and courts, J&J recently made another attempt to file for Chapter 11 bankruptcy. The company hopes that the latest bankruptcy filing, which proposes a $10 billion compensation plan for victims and their families, will end litigation against it. So far, this third bankruptcy filing has received a vote of confidence from many victims.
When companies are hit with thousands of lawsuits alleging harm from their products, they face the risk of multi-million or even billion-dollar verdicts. Over the years, several ovarian cancer and mesothelioma victims who blame J&J’s talc-based products for their illnesses have been awarded multi-million dollar verdicts. Such financial judgments can be overwhelming. These substantial verdicts were the reason J&J pursued bankruptcy twice before. Bankruptcy provides a way for companies to manage and limit their financial exposure. By filing a Chapter 11 bankruptcy, also called reorganization bankruptcy, a company can propose a restructured plan to compensate victims and their families without having to pay out huge, unpredictable verdicts that could cripple the business financially. After a company files for Chapter 11 bankruptcy, the “automatic stay” halts ongoing litigation and prevents people from filing new cases. In the case of J&J, this third bankruptcy filing has stopped thousands of lawsuits from moving forward. If the bankruptcy is approved, the company can implement its proposed compensation plan.
Johnson & Johnson filed its first bankruptcy case in Charlotte, North Carolina, and the second case in Trenton, New Jersey. Both efforts were unsuccessful, as victims and courts rejected both cases. The third time, J&J filed its Chapter 11 bankruptcy case in Houston, Texas, immediately halting thousands of pending lawsuits. While J&J’s latest bankruptcy filing has garnered support from many victims with pending claims, the company still faces opposition from some victims and their attorneys, who are seeking higher compensation and more accountability from the pharmaceutical company.
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