Weekly Mass Torts Bulletin 2023-October-23

Open J&J Mulls Third Talc Bankruptcy configuration options

J&J Mulls Third Talc Bankruptcy

Johnson & Johnson (J&J) is considering initiating bankruptcy proceedings for its talc unit for the third time as part of an effort to advance an $8.9 billion settlement for thousands of claims alleging that J&J's baby powder caused cancer and mesothelioma.

The company made this announcement during an earnings call. During the third-quarter call, J&J's worldwide vice president of litigation mentioned that the company is actively seeking a consensual resolution for the talc-related claims through yet another bankruptcy filing. This approach aligns with a recommendation from the U.S. Bankruptcy Court for the District of New Jersey, which had rejected J&J unit LTL Management's second Chapter 11 case in July, citing a lack of the required financial distress for bankruptcy.

The vice president referred to the bankruptcy filing as the "second prong" of J&J's strategy to resolve the talc litigation. In addition to this, the company is also attempting to appeal the July dismissal by the New Jersey bankruptcy court to the U.S. Supreme Court.

The potential bankruptcy filing is following a similar path to LTL's first Chapter 11 filing, with a vote expected within the next six months to determine if the necessary supermajority of claimants supports the plan.

LTL was established in October 2021, shortly before the company's initial Chapter 11 filing in North Carolina bankruptcy court to address numerous claims stemming from exposure to J&J's cosmetic talc products, such as Johnson's Baby Powder and Shower to Shower body powder. Claimants allege that these products contain asbestos, which can lead to ovarian cancer, mesothelioma, and other severe health issues. J&J maintains that its products are safe, asbestos-free, and do not cause cancer or other illnesses.

A series of corporate transactions, known as the "Texas two-step" strategy, resulted in a division of assets and liabilities between J&J's consumer products business (Johnson & Johnson Consumer Inc.) and LTL (which holds the talc injury liability).

The first case was transferred to New Jersey bankruptcy court, where a U.S. Bankruptcy Judge rejected a motion from the official committee of talc claimants who sought dismissal on the grounds of bad faith. The judge believed that bankruptcy was the most efficient way to address the company's talc-related liability.

In January, the Third Circuit overturned the Chapter 11 case, stating that LTL was not in financial distress and lacked the necessary good faith to initiate bankruptcy proceedings. Shortly after the case was dismissed in April, LTL initiated a second bankruptcy, this time with an $8.9 billion settlement trust agreement involving numerous plaintiff firms representing nearly 60,000 talc claimants.

The talc claimants committee in the new case, along with the Office of the U.S. Trustee and a few other plaintiff firms, sought dismissal of the bankruptcy filing, resulting in a five-day dismissal trial in late June, which also led to the second case being thrown out.

GSK Resolves Zantac Cancer Claims

GlaxoSmithKline has recently reached a settlement agreement in California state court with four plaintiffs who had filed lawsuits related to Zantac, a heartburn drug that was recalled in 2019 due to its association with cancer.

The lawsuits alleged that the use of Zantac, which contained the unstable active pharmaceutical ingredient ranitidine, resulted in the development of cancer, particularly due to the presence of the carcinogenic chemical byproduct N-Nitrosodimethylamine (NDMA).

Over the past four years, various companies, including GlaxoSmithKline, Boehringer Ingelheim, Pfizer, Sanofi, and others involved in the sale of both brand name and generic ranitidine pills, have faced legal actions from individuals who claim to have been diagnosed with cancer and other injuries linked to NDMA exposure.

Initially, most of the litigation was consolidated in the federal court system, with all Zantac cancer lawsuits centralized in the U.S. District Court for the Southern District of Florida for coordinated discovery and pretrial proceedings. However, a controversial ruling issued by the judge last year excluded all plaintiffs' expert witnesses from testifying at trial, making it challenging for federal plaintiffs to prove that Zantac caused their cancer. This led to the dismissal of all Zantac lawsuits pending in the federal court system.

It is important to note that this federal ruling does not affect Zantac lawsuits filed in California and other state courts, where different standards for the admissibility of expert witness testimony are applied. Therefore, cases in state courts continue to address the allegations brought forth by Zantac users who claim that the drug led to their cancer diagnoses.

Florida AG Sues Juul For Deceptive E-cigarette Marketing

The Florida Attorney General has initiated a lawsuit against the electronic-cigarette company Juul Labs, accusing the company of improperly marketing its products to children and providing misleading information about the nicotine content in its offerings.

The lawsuit was filed in Hillsborough County circuit court and seeks both civil penalties and an injunction to prevent Juul from targeting children through its marketing and product design, as well as from deceiving consumers regarding nicotine concentration. The lawsuit alleges that Juul violated the Florida Deceptive and Unfair Trade Practices Act.

According to the lawsuit, Juul engaged in extensive marketing efforts targeted at underage users, such as hosting launch parties, using stylish and youthful models in advertisements, posting on social media, and distributing free product samples. The company also designed its products with a sleek, technology-focused appearance that could be easily concealed and offered flavors known to be appealing to underage consumers.

Additionally, Juul modified the chemical composition of its products to make the vapor less harsh for young, inexperienced users. To maintain its young customer base, Juul relied on age-verification methods that it knew were ineffective.

In response, Juul stated that the attorney general chose not to participate in a settlement reached between the company and 48 states and territories. Juul also highlighted the steps it has taken, including discontinuing the distribution of non-tobacco and non-menthol products in anticipation of FDA guidance on flavors, ending mass-market product advertising, and reorganizing the company with a focus on combating underage use. Juul claimed that, as a result of these efforts, underage usage of its products has decreased by 95%.

Rite Aid Bankrupt Due To Sales Drop & Opioid Lawsuits

Rite Aid, a prominent U.S. pharmacy chain, has recently declared bankruptcy and secured $3.45 billion in fresh funding as part of its restructuring strategy in response to declining sales and legal issues related to opioid lawsuits.

In 2022, the company settled for up to $30 million to resolve allegations that its pharmacies contributed to an oversupply of prescription opioids. This bankruptcy filing is a crucial step in their efforts to cut debt and position themselves for future growth, according to Rite Aid.

The restructuring plan aims to significantly reduce the company's debt while addressing litigation claims fairly. Rite Aid cited ongoing costs associated with underperforming stores as a major challenge, having closed over 200 struggling locations in recent years. The company employs 45,000 individuals, including over 6,100 pharmacists, who fill nearly 200 million prescriptions annually. Rite Aid reported having $134 million in cash, the ability to borrow up to $390 million, and $524 million in liquidity.

In March, the Justice Department filed a complaint against Rite Aid, alleging that the company knowingly filled hundreds of thousands of unlawful prescriptions for controlled substances between May 2014 and June 2019. The complaint also accused both pharmacists and the company of disregarding warning signs indicating the illegality of these prescriptions. This action was prompted by three whistleblowers who had previously worked at Rite Aid pharmacies.

In September, Rite Aid announced plans to close 400 to 500 stores across the U.S. The company, which operates more than 2,100 pharmacies in 17 states, has now revealed its intention to close additional underperforming stores, without specifying the number or timing of these closures.

Former Pfizer Talc Supplier Files Bankruptcy

Barrett Minerals Inc. (BMI), a former talc supplier to the cosmetics industry, has entered bankruptcy proceedings.

The company, previously owned by Pfizer until its 1992 sale, is currently contending with approximately 550 personal injury lawsuits linked to talc usage, a notable increase from just 14 cases in 2018, underscoring the growing awareness of talc-related litigation.

Traditionally, Barrett relied on Pfizer to assist in resolving these claims related to talc exposure prior to 1992. However, the company has incurred significant litigation costs, mainly because Pfizer has resisted providing comprehensive indemnification for talc-related claims. Barrett Minerals Inc. also maintains that these claims lack validity.

The Chairman and CEO of Barrett reaffirmed their stance, stating, "We continue to believe the lawsuits against BMI lack merit, and we stand by the safety of BMI's talc products, which have consistently undergone rigorous testing."

While Barrett ceased selling talc for cosmetic products in 2014, it still supplies talc for other consumer goods such as food and pharmaceuticals. Barrett's talc was formerly used in well-known products like Gold Bond body powder. The company has chosen not to comment further on this issue.

However, Barrett is not the only cosmetics-related company that has recently sought bankruptcy protection. Last month, SmileDirectClub, which has been providing direct-to-consumer teeth-straightening products for almost a decade and is known for its affordability, also filed for Chapter 11 bankruptcy.

Despite experiencing weak sales and losses over the years, SmileDirectClub is expected to continue regular operations during the bankruptcy process, including maintaining its 105 physical locations.

Additionally, the retail industry has witnessed several major players grappling with bankruptcy this year.

FDA Displeased with Philips CPAP Tests

Federal regulators have issued an update on a Philips CPAP recall issued in 2021, saying that they are “unsatisfied” with both the status of the recall and the manufacturer’s testing of the sound abatement foam that was found to breakdown and release particles directly into the sleep apnea machines’ air pathways.

On October 5, the U.S. Food and Drug Administration (FDA) released an update on the Philips CPAP recall, stating that they are continuing to monitor the recall's status more than two years after its initial announcement.

The recall has impacted millions of CPAP, BiPAP, and mechanical ventilators sold since 2009, all of which contained a flawed polyester-based polyurethane (PE-PUR) foam designed to reduce noise during machine use. However, consumers reported finding small black particles and debris in various parts of the machines, including tubes and face masks.

Due to the serious health risks associated with the Philips CPAP foam, consumers were advised to stop using their machines unless they were needed for life-supporting treatment. This has led to thousands of lawsuits being filed by former users who developed conditions such as cancer, lung damage, and other respiratory injuries after using the recalled devices.

The FDA's update emphasizes that they are actively monitoring the progress of the recall and providing new information to device users, patient care facilities, and other stakeholders. Furthermore, they express their dissatisfaction with the current status of the recall and their commitment to taking measures to safeguard the health and safety of individuals using these devices.

Following the recall, the FDA mandated that Philips conduct "extensive" testing on the sound-dampening foam to assess potential health risks associated with particles and volatile organic compounds (VOCs) released as the foam degrades.

However, the agency has expressed dissatisfaction with the testing conducted by Philips thus far and has called on the company to perform additional testing to more accurately evaluate the risks to CPAP users.

In the words of FDA officials, "The FDA has examined the information and data provided by Philips and believes that the testing and analysis shared by Philips to date are insufficient to comprehensively assess the risks posed to users by the recalled devices. Although Philips has concluded that the exposure to foam particles and VOCs from these devices is 'unlikely to result in appreciable harm to the health of patients,' the FDA believes that additional testing is warranted.