HOUSTON - All sides have spoken, and now it's up to Houston bankruptcy judge Christopher Lopez to decide the fate of tens of thousands of claims alleging ovarian cancer was caused by talc in Johnson & Johnson's Baby Powder.
A two-week trial in Lopez's court concluded this week, as J&J hopes to use a spinoff company to create a $9 billion fund that pays claimants who say the talc contained asbestos. Using an offshoot company to do so, while the parent company still maintains a value like J&J does, has critics.
But one firm came around during the trial. Key to the approval process is the votes of actual claimants, with a threshold of 75% needed for approval. Records showed J&J was already at 83% before the trial.
On Feb. 28, Ashcraft & Gerel asked Lopez to allow it to change the votes of its clients. The winds shifted last year when the Smith Law Firm engineered an extra $1.1 billion for the plan.
In July last year, all but two of Ashcraft & Gerel's 1,507 clients voted no. But then came the extra money, plus J&J's agreement to accelerate the effective date of the trust.
Ashcraft & Gerel's new client ballot has 1,493 clients voting to accept the plan, after prodding from the firm. It notified clients it was in their best interest to change their votes, and 839 did.
The rest were told if they didn't cast a vote, the firm would use its power of attorney to vote for them, which it is doing for 654 clients.
"Ashcraft & Gerel understands how important it is for claimants to be fairly, efficiently and expeditiously compensated," the firm's motion says. "Many of the firm's clients have passed during the pendency of this litigation."
Like Beasley Allen, which maintained its opposition throughout the trial, Ashcraft & Gerel serves as co-lead counsel in a multidistrict litigation proceeding in New Jersey. Should cases be resolved there, those firms are entitled to shares of a common fund for attorneys fee.
To alleviate those concerns, J&J is paying $650 million in Houston for a similar fund.
"As co-lead counsel in the MDL and one of the leading talc litigation firms, Ashcrft & Gerel was previously against Plan confirmation," it wrote.
"However, after thoroughly considering the improvements to the initial plan... Ashcraft & Gerel now believes it is in the best interests of its clients that this Court confirm a plan."
Whether Lopez does, as he also weighs in the objections of insurance companies (some of which believe the claims are worthless and would rather fight in civil court), remains to be seen. He has taken the arguments under advisement.
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 (two firms including Beasly Allen) to appeal to district court in January.
The Coalition calls its effort the "last practical opportunity for review of a scheme that turns" the bankruptcy system upside down.
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.
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.