Johnson & Johnson (J&J), one of the world’s largest healthcare companies, has faced more than 60,000 lawsuits alleging that its talc-based products—especially Johnson’s® Baby Powder—caused ovarian cancer and mesothelioma due to asbestos contamination. In an effort to resolve these claims, J&J pursued a controversial legal maneuver: attempting to settle mass tort litigation through bankruptcy court. After three failed attempts, federal judges have now rejected the strategy, sending shockwaves through the legal system and reshaping the path forward for plaintiffs.
This article explains J&J’s bankruptcy strategy, why it failed, and what it means for cancer victims seeking justice.
What Was Johnson & Johnson’s Bankruptcy Strategy?
J&J used a legal maneuver known as the “Texas Two-Step”, which involves:
- Creating a subsidiary to hold talc-related liabilities
- Transferring all talc claims to that entity
- Having the subsidiary file for Chapter 11 bankruptcy
This approach was designed to shield J&J from direct liability while capping payouts through a court-approved settlement fund. The company argued that bankruptcy would provide a faster, fairer resolution for plaintiffs compared to individual trials.
The strategy was first deployed in 2021 through a subsidiary called LTL Management, and later through Red River Talc LLC, created in 2024 to handle ovarian cancer claims2.
Why Did the Bankruptcy Strategy Fail?
1. Lack of Financial Distress
Under bankruptcy law, a company must be in financial distress to qualify for Chapter 11 protection. Judges repeatedly found that J&J—a profitable company with a market cap exceeding $350 billion—did not meet this standard.
In the most recent ruling, Judge Christopher Lopez stated that J&J “simply did not belong in bankruptcy court” and emphasized that the company’s maneuver was not a legitimate use of the bankruptcy system.
2. Flawed Voting Process
J&J claimed that over 83% of plaintiffs supported its proposed $10 billion settlement. However, the court found serious flaws in the voting process, including:
- Votes collected by attorneys rather than individual claimants
- Inadequate documentation of consent
- Inflated vote counts (at least half deemed invalid)
This undermined J&J’s argument that the settlement had broad support.
3. Overreach in Legal Releases
The proposed settlement sought to release claims not only against J&J, but also against:
- Retailers that sold talc products
- Kenvue, J&J’s consumer health spinoff
- Entities that had never filed for bankruptcy
Judge Lopez criticized this overreach, stating that the plan violated plaintiffs’ constitutional rights to pursue claims in civil court.
What Would the Settlement Have Provided?
J&J’s proposed $10 billion settlement would have:
- Created a structured compensation system for current and future claimants
- Paid ovarian cancer victims between $75,000 and $150,000, depending on severity
- Barred future lawsuits related to talc products
Critics argued that the payout amounts were far below what juries have awarded in individual trials, which have reached hundreds of millions or even billions of dollars3.
What Happens Now?
With the bankruptcy strategy rejected, talcum powder litigation returns to the civil court system, where plaintiffs can:
- Proceed with individual lawsuits
- Join MDL No. 2738 in federal court
- Pursue full compensation through trial or settlement
Attorneys representing plaintiffs have welcomed the ruling. As talcum powder attorney Andy Birchfield stated, “Our clients will finally have the chance to present their cases before a jury and obtain the justice they deserve”.
Implications for Plaintiffs
1. Access to Jury Trials
Plaintiffs now retain their constitutional right to a jury trial, which may result in higher compensation and public accountability.
2. Renewed Filing Opportunities
Many potential claimants delayed filing due to uncertainty around bankruptcy. With the strategy rejected, new lawsuits are expected to surge—especially among ovarian cancer victims who meet eligibility criteria.
3. Increased Litigation Costs
Law firms that invested heavily in bankruptcy proceedings must now shift resources to civil litigation. Filing fees, medical records, and expert testimony can cost $1,000 or more per case, creating financial pressure for firms representing thousands of clients.
Impact on the Legal System
J&J’s failed bankruptcy strategy has broader implications:
- Legal precedent: Courts may be less receptive to similar corporate maneuvers in future mass tort cases.
- Litigation finance: Funders who backed bankruptcy-based settlements may reassess their risk models.
- Corporate accountability: The ruling reinforces that profitable companies cannot use bankruptcy to avoid liability.
As law professor Melissa Jacoby noted, “Bankruptcy is not the intended venue for profitable companies to cap their liability for an alleged harm”.
Final Thoughts
Johnson & Johnson’s attempt to resolve talcum powder lawsuits through bankruptcy has failed—three times. Courts have made it clear that the company must face plaintiffs in civil court, where victims can pursue full compensation and accountability. For thousands of women and families affected by ovarian cancer and mesothelioma, this ruling represents a turning point. See Johnson & Johnson Ovarian Cancer Lawsuit Update.
If you or a loved one used talc-based products and developed cancer, now is the time to act. With the bankruptcy door closed, the path to justice is open.
References
- Drugwatch. (2025, April 1). Judge shoots down J&J’s multibillion-dollar talc settlement plan. https://www.drugwatch.com/news/2025/04/01/judge-shoots-down-jjs-multibillion-dollar-talc-settlement-plan/
- Bloomberg Law. (2025, May 27). J&J’s failed talc bankruptcy puts some mass tort firms in bind. https://news.bloomberglaw.com/bankruptcy-law/j-js-failed-talc-bankruptcy-puts-some-mass-tort-firms-in-bind
- Marketplace. (2025, April 2). Johnson & Johnson tried 3 times to resolve talc suits in bankruptcy court. It didn’t work. https://www.marketplace.org/story/2025/04/02/johnson-johnson-tried-3-times-to-resolve-talc-suits-in-bankruptcy-court-it-didnt-work
- Justice Counts. (2025, April 5). Johnson & Johnson loses third bankruptcy case over talcum powder lawsuits. https://justicecounts.com/legal-news/johnson-johnson-loses-third-bankruptcy-case-over-talcum-powder-lawsuits-what-it-could-mean-for-claimants/
- Voight, P.A. (2025, April 1). Why did a U.S. judge reject Johnson & Johnson’s $10 billion baby powder settlement?. https://myvoight.com/2025/04/01/why-did-a-u-s-judge-reject-johnson-johnsons-10-billion-baby-powder-settlement/