J&J's proposed talc settlement sparks lawsuit between plaintiffs' firms
By Dietrich Knauth
Sept 11 (Reuters) -Johnson & Johnson's latest effort to end tens of thousands of talc lawsuits has sparked a new legal battle between plaintiffs' law firms, with one firm accusing its former partner of selling out to the healthcare behemoth to cover its own debts.
Beasley, Allen, Crow, Methvin, Portis & Miles, which is leading the opposition to J&J's settlement strategy, filed a lawsuit Tuesday in Alabama federal court accusing The Smith Law Firm of breaking a joint venture agreement to represent 11,000 people who have alleged that J&J's Baby Powder and other talc products caused their cancer.
J&J, which denies the claims and says that its talc is safe, has announced plans to finalize a multibillion-dollar settlement of the lawsuits through the bankruptcy of a subsidiary company. It recently announced a new deal with the Smith Law Firm, which the company described as a leading holdout to the settlement.
J&J had previously committed to paying $8 billion over 25 years, and two sources familiar with the new agreement said that the company had kicked in approximately $1.1 billion more to win support from Smith's clients.
In its Tuesday lawsuit, Beasley Allen said that Smith, the sole member of the Smith Law Firm, reneged on a joint venture agreement in order to get a faster payment from J&J and escape from debts he owes to litigation funders.
Smith and Beasley Allen did not immediately respond to requests for comment. J&J declined to comment on the lawsuit or settlement talks.
Smith has sought to persuade the firms’ mutual clients to vote in favor of J&J’s proposed bankruptcy settlement, according to the lawsuit. J&J initially had set a July 26 voting deadline for the deal, but it extended that timeline to allow Smith to drum up more support.
J&J is preparing to have a subsidiary declare bankruptcy for a third time by the end of this month to finalize the proposed settlement, according to people familiar with the matter. Courts have rebuffed J&J's two previous efforts to end the talc lawsuits through a subsidiary's bankruptcy.
Beasley Allen has opposed the latest settlement proposal, saying that it abuses U.S. bankruptcy law and does not pay enough to compensate people who have developed cancer.
Smith’s efforts to drum up votes for J&J’s settlement violate the joint venture agreement, which provided that Beasley Allen would “be responsible for all client contact,” the lawsuit alleged.
Beasley Allen said that Smith, an attorney who won the first talc trial against J&J in 2013, sought to partner with Beasley Allen and Porter Malouf in order to bring more cases against J&J. The agreement requires Beasley Allen to shoulder 50% of the workload and costs of litigation, with Smith and Porter Malouf taking care of the other half.
But Smith failed to live up to his end of the bargain, and found himself deep in debt to litigation funders after buying out Porter Malouf's responsibilities without telling Beasley Allen, according to the lawsuit. Smith also secretly kept some talc clients for himself, instead of bringing them to the joint venture, according to Beasley Allen.
Beasley Allen also named Porter Malouf as a defendant in its lawsuit, saying it failed to live up to responsibilities under the joint venture agreement.
Porter Malouf did not immediately respond to a request for comment.
J&J has alleged that Smith Law Firm owes as much $240 million to its funders, according to Beasley Allen’s complaint.
Beasley Allen said that Smith also owes $1.1 million for litigation expenses fronted by Beasley Allen in the joint venture.
The case is Beasley Allen v. The Smith Law Firm et al, U.S. District Court for the Middle District of Alabama, No. 24-cv-00582
For Beasley Allen: Robert Segall and David Martin of Copeland, Franco, Screws & Gill
For The Smith firm: Not yet available
Read more:
Johnson & Johnson adds $1.1 billion to proposed talc settlement
The battle over J&J’s bankruptcy plan to end talc lawsuits
With J&J pushing a 3rd talc bankruptcy, court affirms earlier loss
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