supplier of talc used in Johnson & Johnson's baby powder filed for Chapter 11 bankruptcy on Wednesday in the wake of multibillion-dollar lawsuits alleging its products caused ovarian cancer and asbestos-related mesothelioma.
Talc America, the US unit of French group Imerys SA, said it filed for bankruptcy because it lacks the financial clout to defend against nearly 15,000 lawsuits over its talcmineral product, which is also used in cosmetics.
Imerys said that while it continued to believe the
lawsuits are without merit, the prospect of rising settlement and defense costs over the next few years prompted the decision to file for bankruptcy.
They also cite a multibillion-dollar verdict against
Johnson & Johnson and the ensuing media attention as factors that led to the Chapter 11 filing.
In July, a Missouri jury ordered J&J to pay a record $4.69 billion (3.65 billion pounds) to 22 women who said asbestos in
talc caused ovarian cancer. J&J has said it is appealing that verdict.
Imerys said it had settled for an undisclosed amount prior to the trial.
Imerys also attributed its filing to a dispute
over an indemnity agreement. Imerys said some of its supply agreements required J&J to indemnify Imerys, but it said the US healthcare conglomerate had refused to do.
Imerys and J&J have repeatedly denied the allegations about
talc, saying numerous studies and tests by regulators worldwide have shown their talc to be safe.
J&J on Wednesday declined to comment on Imerys
Talc America's Chapter 11 filing and on the allegations against it over the indemnification agreements.
Reuters on December 14 published a report detailing that J&J knew that the
talc in its raw and finished powders sometimes tested positive for small amounts of asbestos from the 1970s into the early 2000s - test results it did not disclose to regulators or consumers.
J&J has said that its
talc products do not contain asbestos.
bankruptcy provided the best avenue for addressing its talc liability. Bankruptcy provides Imerys a single forum to settle the widespread litigation. A similar strategy has been used by numerous companies facing litigation over faulty breast implants, products containing asbestos and recalled automotive airbags.
Two North American subsidiaries of Imerys, Imerys
Talc Vermont and Imerys Talc Canada, also filed for Chapter 11 on Wednesday.
Total revenue in 2018 for Imerys
Talc America was $174 million, according to records filed with the Delaware Bankruptcy Court.
COMPANY TO ESTABLISH A TRUST
Imerys said in court documents it plans to use
bankruptcy to establish a trust to pay personal injury claims, a strategy typically used by companies facing asbestos claims.
When the company leaves
bankruptcy, current and future litigation claims will be channeled to the trust rather than Imerys, which would be freed from future lawsuits over talc.
Imerys could finance the trust with the disputed indemnity agreement with J&J and its right to insurance proceeds, which the company estimated could be worth around $700 million. It said it also has a right to an undetermined portion of up to $2 billion of
Johnson & Johnson's insurance.
However, the company said some of the policies exclude asbestos claims and none of them c
over claims in which the first exposure occurred after 1986. In addition, punitive damages are often not c overed.
Imerys said it could exhaust some of those insurance proceeds within the first half of this year defending cases.
Court records show that the defense of a single case can cost $4 million.
As a co-defendant with J&J, Imerys has faced at least a dozen US jury trials
over allegations that its talc causes ovarian cancer or mesothelioma.
While some juries awarded damages as high as $2.75 million against Imerys
Talc America, many verdicts were later thrown out on appeal.
Imerys and J&J have also won several trials or had cases result in mistrials due to hung juries.
The verdicts against the company are all still on appeal and Imerys has not yet paid any of those verdicts. However, the company settled at least four cases before they went to trial for undisclosed amounts.
Mark Lanier, a Texas-based lawyer representing many of the
talc plaintiffs, on Wednesday said Imerys Talc America's bankruptcy would not change the litigation.
"We have always targeted our cases against J&J and Colgate Palmolive, the companies that put the asbestos laced
talc into the products," Lanier said.
Colgate-Palmolive is another defendant in the USColgate did not respond to a request for comment. It has denied allegations that its
talc litigation. The New York-based company sold Cashmere Bouquet, a cosmetic talcum powder, from 1871 to 1995. talc products cause cancer.