Compass Lexecon Client Wins Dismissal of J&J Subsidiary Bankruptcy

On September 20, 2024, Johnson & Johnson subsidiary Red River Talc (RRT) filed a prepackaged bankruptcy to resolve the tens of thousands of pending and future personal injury claims alleging ovarian and other gynecological cancers linked to the use of J&J talc-based products.

The proposed Plan of Reorganization (Plan) called for a $9 billion fund to compensate all talc-related claims against J&J, including ovarian cancer claims, other gynecological cancer claims, and indemnification claims on behalf of several hundred Protected Parties, and to fund all trust expenses. Ovarian cancer claims were to be paid according to a points system at a to-be-determined dollar value per point. The disclosure statement estimated that ovarian cancer claimants would receive between $75,000 and $175,000 on average, which was characterized by the Plan as “full payment.” Indemnity and trust expenses were to be paid based on incurred costs, and non-ovarian cancer claims were to be paid a fixed amount of $1,500 per claim.

Based on a pre-petition vote, J&J claimed that 83% of current claimants supported the Plan. Compass Lexecon’s client, the Coalition of Counsel for Justice for Talc Claimants (Coalition), opposed the Plan. The Coalition was joined in their opposition by the Office of the U.S. Trustee and a group of insurers.

Yvette Austin, Chair of Compass Lexecon’s Global Finance Practice, was retained by counsel for the Coalition to provide expert testimony on economic issues related to the proposed Plan. The court held a two-week trial during which Ms. Austin testified that ovarian cancer claimants would not be paid in full, that indemnity claims could significantly deplete the trust funding, and that the voting procedures gave all individual claimants an equivalent vote, notwithstanding that the Debtor assigned different values to ovarian versus non-ovarian cancer claims.

On March 31, 2025, U.S. Bankruptcy Judge Christopher M. Lopez dismissed the case. The Judge’s decision centered on voting irregularities and impermissible non-consensual third-party releases. In his decision, Judge Lopez also noted three economic factors consistent with Ms. Austin’s testimony: (i) the plan was not a “full pay” plan, (ii) the magnitude of the indemnity obligations would result in the Plan not being feasible and (iii) the proposed plan improperly gave equal votes to claims of disparate value.

Ms. Austin was supported by a team led by Alex Rinaudo and Alice O’Donnell. Compass Lexecon worked with Melanie L. Cyganowski, Adam C. Silverstein, Sunni P. Beville, David A. Castleman, and Jennifer S. Feeney of Otterbourg PC, and Brian A. Glasser, Thomas B. Bennett, David L. Selby II, Jonathan Gold, Katherine E. Charonko, and Elizabeth L. Stryker of Bailey & Glasser LLP.