HOUSTON - The two law firms opposing Johnson & Johnson's massive talcum powder settlement that would give $9 billion to women blaming their ovarian cancer on Baby Powder wants a new vote.
Ahead of a trial set to begin next week in Houston federal bankruptcy court, the Coalition of Counsel for Justice for Talc Claimants, which is led by the firm Beasley Allen, wrote Feb. 13 that the voting process that led to 83% of plaintiffs approving the plan was inconsistent.
The Coalition's pre-trial brief says the settlement is the result of bad faith by J&J and the bankruptcy case should be dismissed for a multitude of reasons already laid out in its objection.
Judge Christopher Lopez will have to address the Coalition's call for a new vote. Currently, the plan has surpassed a 75% threshold of approval by clients of firms that support the agreement.
"Yes" votes increased last year when J&J promised to pump another $1 billion into a trust that will handle ovarian and gynecological cancer claims.
"(T)he Coalition will demonstrate that the pre-petition solicitation and voting process was so rife with irregularities and inconsistent treatment of different law firms and the claimants they represent that it cannot be said that the vote accurately reflects the claimants' votes," the Coalition wrote.
"These irregularities further demonstrate the Debtor's bad faith, warranting dismissal or denial of confirmation. At a minimum, however, it requires resolicitation of votes through process approved by this Court with clear instructions and consistent treatment of all votes."
J&J is trying to use a spinoff company, Red River Talc, to absorb the company's liabilities in cases alleging its Baby Powder contained asbestos and caused ovarian cancer in tens of thousands of individuals. Rather than fight each case individually in various courts nationwide, J&J hopes to streamline the process through a $9 billion bankruptcy.
If approved, ovarian cancer claims will be resolved through a bankruptcy trust in Houston federal court. Supporters say this will pay claimants quicker and easier, but law firms opposed say their clients won't get their day in court and lose the potential for a blockbuster, multimillion-dollar verdict from a jury.
Beasley Allen has been a vocal critic of J&J's repeated attempts to use the bankruptcy system to stay out of civil court, considering how much money the company has. The move to Texas bankruptcy court has been dubbed the "Texas Two-Step."
But opposition waned during the Texas bankruptcy. J&J says claimants will receive on average twice what they would in a court case, as firms like the Smith Law Firm had clients change their mind after the additional $1 billion.
"Indeed," the Coalition wrote, "given the moving target that has been the Debtor's proposed plan and votes coming in at different times and based on different proposed plans, it is only fair that claimants be allowed to vote on the current iteration of the Debtor's plan.
"Ideally, whatever that iteration may be, the plan sent out for solicitation must cure the infirmities here and be accompanied by an accurate and complete disclosure statement."
Beasley Allen and the Smith Law Firm are fighting each other in Alabama federal court. Beasley Allen is accusing Smith of pushing approval of the settlement on its clients because it owes as much as $240 million to a lender that funded its litigation.
Supporters of the plan say it’s the only realistic way to settle some 40,000 claims by women who say their cancer was caused by asbestos-tainted talc. Johnson & Johnson has won most of the cases that have gone to trial so far and maintains there was never asbestos in its products.
But a few devastating losses, including a $2.1 billion verdict in Missouri, forced the company to enter settlement negotiations. Defending the cases has cost J&J $10-20 million a month and trying each one in court would take decades, with wildly different results for individual plaintiffs.
Proponents, including the Smith firm, say bankruptcy offers a faster and fairer process for compensating cancer plaintiffs. The latest bankruptcy plan, J&J's third after two failed efforts in New Jersey, includes $650 million in a fund to cover a shared portion of plaintiff legal fees.
The Smith Law Firm took aim at Beasley Allen in its pre-trial brief. The two formerly worked together and submitted a joint master ballot before the extra money had Smith clients changing their minds.
"The time has come to cease the relentless litigation of the past several years and to finally permit recoveries to flow to the claimants who so richly deserve them," SLF wrote.
J&J has claimed there were voting irregularities by Beasley Allen's clients. When claimants who had their cases dismissed still declined to approve the bankruptcy plan that would pay them, it raised eyebrows.
There is evidence Beasley Allen lawyer Andy Birchfield cast negative votes for clients who approved the plan, J&J says.
Included were 5,500 gynecological cancer claimants rejecting the plan, even though Birchfield testified their claims had no value in the tort system.
"They have not - they have not sustained a legally cognizable injury that would allow us to file a claim in the tort system," he said at a deposition.