Johnson & Johnson
Plaintiff lawyers who have pushed dubious claims that talcum powder causes ovarian cancer for more than a decade have agreed to settle nearly all their cases after suffering a courtroom loss over expert witnesses and a disclosure of conflicts that could have cost them hundreds of millions of dollars in fees.
Johnson & Johnson has agreed to pay $5.5 billion to settle some 76,000 lawsuits in state and federal courts that alleged cosmetic talc contained asbestos, much lower than the $9 billion plan it once offered in a failed attempt to settle talc litigation through the bankruptcy of a specially formed subsidiary in Texas. That “heavily negotiated” deal fell apart last year after a federal bankruptcy judge in Houston ruled the plan was unfair to claimants and couldn’t be confirmed.
Things changed after one of the most powerful plaintiff firms in talc litigation, Beasley Allen, was disqualified from tens of thousands of cases over its communications with a former J&J attorney, found by various judges to have been a violation legal ethics rules. Then plaintiff lawyers were forced to withdraw their top two medical experts for the first federal trial after a disastrous hearing in which they couldn’t rule out other causes of ovarian cancer or agree on how it caused a specific claimant’s disease.
Last week, Magistrate Judge Rukhsanah Singh granted J&J’s motion requiring the plaintiffs to show cause as to why all 69,000 cases in the federal multidistrict litigation shouldn’t be dismissed for lack of evidence, saying there was “grave doubt” any of them could be proven.
Talks accelerated with the plaintiff lawyers, and J&J announced the new settlement yesterday. According to J&J, the agreement requires plaintiff lawyers to convince at least 95% of their 79,000 clients in state and federal courts to accept the terms, which would provide about $69,000 per claimant. As with other mass settlements, the lawyers are expected to keep more than 40% of that, or more than $2.2 billion, in fees for themselves.
Beasley Allen fought fiercely to derail previous settlement attempts but may have little leverage this time since its only remaining clients are a few hundred in California. The settlement doesn’t include mesothelioma claims, which J&J is settling in a separate process.
Additional pressure on the lawyers to settle may have come after a Beasley Allen attorney informed a judge in Florida that other leading plaintiff lawyers had also communicated with James Conlan, a onetime J&J lawyer who knew details of the company’s litigation and settlement strategies. Conlan left the practice of law to form a firm with which he intended to make a profit by buying and settling talc liabilities, but legal ethics rules prohibit lawyers from switching sides in active litigation.
As it discussed a resolution with Conlan, Beasley Allen started a committee opposed to the $9 billion settlement. It pointed to flaws in a yes-or-no vote by plaintiffs on whether to take that money, and a Houston bankruptcy judge agreed in rejecting the plan. Later, a client would claim Beasley Allen tried to trick her into signing a retroactive power of attorney giving the firm the power to vote against the settlement.
Beasley Allen voted against the bankruptcy plan on behalf of some 11,500 clients, claiming they were better off negotiating a settlement or suing in court. But once the bankruptcy plan failed, J&J mounted an offense and got Beasley Allen booted from thousands of cases in New Jersey state court, its lead counsel position in the federal MDL and other lawsuits in Florida, Pennsylvania and Chicago.
It also asked the MDL judge to investigate whether other plaintiff lawyers had ethical problems over communications with Conlan. If they were disqualified like Beasley Allen had been, they might have been cut out of “common benefit” fees, which are a pool of money, usually 10% or more of the total settlement amount, shared by the lead attorneys.
The settlement still requires plaintiff lawyers to obtain agreements from 95% of their clients. They may have better luck with that than plaintiff lawyers in PFAS litigation, who admitted in a recent court filing that they are having trouble contacting some of the thousands of clients they recruited through television ads and other marketing efforts. In J&J’s previous attempts to settle talc litigation through bankruptcy, lawyers had to obtain votes in favor of the plan from their clients and presumably have maintained contact.
The settlement doesn’t address future ovarian cancer cases and lawyers could theoretically hire new experts and make the same claims as in the cases J&J is settling. But the lead plaintiff lawyers, having signed an agreement that will bring them more than $1 billion in fees, have little incentive to fight case management orders that require future plaintiffs to provide detailed information, including expert opinions and product use information, before they can even file a lawsuit.
That up-front cost may be enough to discourage other law firms from jumping into talc litigation, especially after a federal judge issued a ruling casting doubt upon the viability of any such claims. The company scored plenty of defense verdicts in state-court trials, but juries were hard to predict. For example, there have been two bellwether trials in Los Angeles state court, with the first a $40 million verdict against the company and the second a verdict in favor of it.
“While we are confident the Company would have ultimately prevailed with further litigation, as it has in the vast majority of cases tried to date, this resolution allows the Company to put this matter behind it and remain focused on its mission to develop medicines and devices that save lives,” said Erik Haas, Worldwide Vice President of Litigation for Johnson & Johnson.
