HOUSTON - As a Houston federal bankruptcy judge conducts a lengthy trial over whether to approve Johnson & Johnson's plan to effectively settle tens of thousands of ovarian cancer claims, lawyers against that strategy are fighting to move the issue to a different court.
Two law firms including Beasley Allen have appealed a ruling from Judge Christopher Lopez that denied their request to move the case to New Jersey - where it has been rejected before.
Calling the litigation complicated would be an understatement, as parties for and against J&J's plan argue their points in Lopez's court during a trial that began last week. 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. Using an offshoot company to do so, while the parent company still maintains a value like J&J does, has critics.
It's the third attempt for J&J after two others failed in New Jersey. Lopez refused to transfer the case back there, leading The Coalition of Counsel for Justice for Talc Claimants to appeal to district court in January.
"Red River and J&J are seeking to use the Bankruptcy Court in this District to allow one of the richest and most profitable corporations in the world to cabin liability for a mass tort it inflicted on individual consumers who developed ovarian and other gynecological cancers from use of Johnson's Baby Powder and related products that J&J knew for many years contained asbestos-laden talc likely to cause cancers," the Coalition wrote.
"J&J has striven to rid itself of the tens of thousands of claims for severe harm by disposing of them through the bankruptcy courts at the lowest possible cost, to retain maximum profits."
The Coalition calls its effort the "last practical opportunity for review of a scheme that turns" the bankruptcy system upside down.
The multidistrict litigation for these claims is in New Jersey, and Beasley Allen is co-lead counsel and entitled to a share of common fees from whatever is recovered there. Should the Texas plan be successful, it could be shut out of that money.
J&J defended its plan on Feb. 10 while urging Judge Keith Ellison to dismiss the Coalition's appeal. It notes that more than 80% of claimants have submitted yes votes, clearing a 75% threshold after offering an extra $1 billion to the fund that will pay them.
It criticized the Coalition for not asking for leave to appeal the order denying transfer.
"No debatable question of law controls, and granting leave would only delay the bankruptcy proceedings, which are fast approaching plan confirmation," the company wrote.
"Declining to transfer venue simply allows a case to continue and does not dispose of any discrete dispute within the case. Thus, far from finally resolving a 'proceeding,' it is a classic example of an interlocutory order."
Supporters of the bankruptcy say it 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.
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.