THE WHAT? Johnson & Johnson is considering a third bankruptcy filing as a strategy to settle approximately $8.9 billion in lawsuits related to their baby powder product. These lawsuits allege that the talc in the product is contaminated and has caused cancer in users. Erik Haas, the head of litigation at J&J, stated in a recent earnings call that the company is currently negotiating with lawyers representing the majority of the talc victims to settle all current and future cases.

THE DETAILS  J&J’s previous attempts at using bankruptcy to settle the talc lawsuits have been rejected twice by courts. Their strategy involves setting up a trust to pay the victims, bypassing jury decisions on damages. Their second bankruptcy attempt, aiming to settle around 40,000 lawsuits for $8.9 billion, was declined by a New Jersey judge who stated that J&J did not meet the required criteria for financial distress. The company is now facing several talc-related trials in the coming six months and plans to appeal the bankruptcy ruling to the US Supreme Court.

THE WHY?  J&J’s potential third attempt at bankruptcy is seen as a legal strategy, possibly to delay the trials. The company, one of the most profitable in the world, is facing over 51,000 lawsuits claiming that their talc products cause cancer. The plaintiffs allege that J&J knew about the asbestos traces in their talc-based powders since the early 1970s. J&J denies that their talc products cause cancer. They have discontinued their talc-based powders in the US and Canada, replacing them with a cornstarch-based version. The legal resolution to these issues is still pending.