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Business & Practice
Johnson & Johnson is offering to pay $8.9 billion to settle all of talc
lawsuits.
Photo: Justin Sullivan/Getty Images
April 10, 2023, 9:00 AM


J&J TALC SUITS’ OUTSIDE FUNDERS UNVEILED VIA LITTLE USED NJ RULE

By Emily Siegel

Deep Dive
Emily Siegel
Correspondent

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 * J&J cases rare example of outside funding made public in New Jersey
 * Business groups target $12 billion litigation finance industry

The sweeping lawsuits against Johnson & Johnson over talc products got a boost
from at least two outside litigation funders, which have invested in hundreds of
claims in exchange for a portion of any winnings.

The deals could soon pay off for Virage Capital Management and TRGP Capital,
funders who teamed up with plaintiffs lawyers handling some of the claims. J&J
is offering to pay $8.9 billion to settle all of the lawsuits.

The funders’ role in the multidistrict litigation is public information, because
the cases are in a federal court in New Jersey. A local court rule requires
parties using outside funding to disclose certain information about their
backers.

Nearly two years after the rule took effect, outside funding disclosures remain
rare in the state’s lone federal court. A handful of disclosures have offered
minimal insight into the $12 billion business of betting on lawsuits.

“Litigation financing is a global multi-billion-dollar industry, and it operates
in secret in the shadows right now,” said Page Faulk, an executive at the US
Chamber of Commerce, a leading critic of outside funding for lawsuits.

Litigants have acknowledged outside funding in only nine cases since the New
Jersey rule took effect, docket reviews by Bloomberg Law found. The vast
majority of the more than 800 filings under the disclosure rule simply stated
that there was no third-party funding.

The New Jersey rule is a trial balloon amid growing calls for regulation of
litigation funders. Other courts have started to scrutinize the role of outside
funding in litigation, while legislation in California and elsewhere would
require the information about the deals be public.

The J&J suits are an example of how third-party funding can level the playing
field between individuals and major corporations who often use their resources
and size to steamroll smaller opponents in court.

The company has been hit with a slew of lawsuits by customers who say J&J’s baby
powder products gave them cancer. Plaintiffs attorneys have scored a number of
jury verdicts and successfully stopped the company from limiting liability
through bankruptcy laws. J&J is taking another stab at the bankruptcy route as
part of the new settlement offer.

Disclosures filed by attorneys from the Morelli Law Firm and the Potts Law Firm
indicate that financing was used in over 500 claims. That’s a fraction of the
60,000-plus claims filed against J&J.

“Plaintiff trial lawyers continue to relentlessly advertise for talc claims,
supported by millions of dollars of litigation financing, all in the hopes of a
massive return on investment,” John Kim, chief legal officer of the J&J
subsidiary seeking bankruptcy protection, said in an April 4 statement following
the settlement offer.


‘STARTING POINT’

Attorney Steven Richman, a member of the New Jersey District Court Lawyers’
Advisory Committee, proposed an initial version of the rule at a committee
meeting in 2019. The US District Court for the District of New Jersey later put
together a subcommittee to explore possible disclosure requirements.

Litigation finance firms railed against new disclosure requirements.

Their trade association, the International Legal Finance Association, submitted
a 20-page letter opposing the move.

“It will serve as a starting point, inspiring the pursuit of highly prejudicial
and protected information in discovery, leading in turn to expensive and
time-consuming motion practice, given the sensitive nature of the information
sought,” the group said.

The prediction hasn’t panned out since the rule went into effect in June 2021.




There is no standard form for these filings, so the number is possibly an under
count. Major litigation finance firms also tracking the disclosures have
confirmed similar findings.

The district court said it’s not tracking the disclosures. Neither are two
groups that advocated heavily for the rule: The New Jersey Civil Justice
institute, an organization representing the state’s business community, and the
Chamber of Commerce.

Anthony Anastasio, the president of the Civil Justice Center of New Jersey, said
the rule is a first step in the right direction for disclosure requirements. He
also shared some skepticism about the filings.

“Creative third-party funders and law firms could potentially restructure their
arrangements to effectively circumvent the limited scope of this rule,”
Anastasio said in an email.

Burford Capital, a publicly traded litigation financier, is keeping closer tabs
on the filings.

Andrew Cohen, a Burford director, said he’s reviewed more than 2,000
disclosures. He also found just a handful of cases in which parties divulge
using outside funding.

Cohen said he hasn’t seen followup discovery requests in the few cases where
funding has been disclosed.

“I don’t know if it’s had any impact at all other than costing litigants some
money to file a bunch of unnecessary filings,” he said.






INSIDE THE FILINGS

The few disclosures on the books offer a rare glimpse into the types of cases
deemed profitable in the notoriously secretive industry.

Lawyers at Quinn Emanuel Urquhart & Sullivan disclosed funding in an antitrust
case for a generic drug treating pulmonary arterial hypertension. Proskauer Rose
trial lawyers said there was financing in a court fight over a product designed
to treat premature ejaculation. Kirkland & Ellis disclosed financing in a patent
infringement case related to a birth control implant.

Litigation funder Legalist invested in a transgender discrimination case against
Seton Hall University.

Other cases include patent infringement claims for a hair straightening brush
and noise reducing headphones.

As for the Johnson & Johnson case, the proposed settlement must be supported by
a large portion of claimants before it is finalized.

Continue Reading

To contact the reporter on this story: Emily Siegel at
esiegel@bloombergindustry.com

To contact the editors responsible for this story: Chris Opfer at
copfer@bloombergindustry.com; John Hughes at jhughes@bloombergindustry.com


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LAW FIRMS

 * Proskauer Rose
 * Quinn Emanuel
 * Kirkland & Ellis

TOPICS

 * settlements
 * personal use product safety
 * corporate counsel
 * commercial debtor
 * legal advertising and solicitation
 * litigation finance

COMPANIES

 * Johnson & Johnson

© 2023 Bloomberg Industry Group, Inc.
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