• Johnson & Johnson (J&J) is in a legal dispute with two law firms over its multibillion-dollar talc settlement strategy.
• Beasley, Allen, Crow, Methvin, Portis & Miles accuses The Smith Law Firm of breaching a joint venture agreement to represent 11,000 individuals alleging J&J's talc products caused their cancer.
• J&J plans to finalize the settlement through a subsidiary's bankruptcy, a strategy met with resistance and two previous court rejections.

Johnson & Johnson (J&J), the healthcare giant found itself at the center of a legal dispute involving two plaintiff law firms. The dispute stems from J&J's ongoing efforts to resolve tens of thousands of talc lawsuits through a multibillion-dollar settlement strategy, which has been met with opposition and sparked a new battle between the law firms.

The law firm Beasley, Allen, Crow, Methvin, Portis & Miles, which is leading the opposition to J&J's settlement strategy, filed a lawsuit on Tuesday in Alabama federal court. The lawsuit accuses The Smith Law Firm of breaching a joint venture agreement that was meant to represent 11,000 individuals who have alleged that J&J's Baby Powder and other talc products caused their cancer.

J&J, on the other hand, continues to deny these claims, asserting that its talc is safe. The company has announced plans to finalize a multibillion-dollar settlement of the lawsuits through the bankruptcy of a subsidiary company.

New Deal Sparks Controversy

In a recent turn of events, J&J announced a new deal with The Smith Law Firm, which the company described as a leading holdout to the settlement. Previously, J&J had committed to paying $8 billion over 25 years. However, two sources familiar with the new agreement revealed that the company had contributed approximately $1.1 billion more to gain support from Smith's clients.

In the lawsuit filed on Tuesday, Beasley Allen alleges that Smith, the sole member of The Smith Law Firm, reneged on the joint venture agreement to secure a faster payment from J&J and escape from debts he owes to litigation funders. Smith defended the latest settlement offer from J&J, describing it as a good result for women suffering from ovarian cancer. He dismissed Beasley Allen's lawsuit as baseless, stating, Attorneys can disagree on a matter without resorting to such petty tactics. I will not be threatened or intimidated from achieving the best result for my clients.

Bankruptcy Strategy and Opposition

Smith has been actively persuading the firms' mutual clients to vote in favor of J&J's proposed bankruptcy settlement, according to the lawsuit. J&J initially set a July 26 voting deadline for the deal, but it extended that timeline to allow Smith to garner more support.

J&J is reportedly preparing to have a subsidiary declare bankruptcy for a third time by the end of this month to finalize the proposed settlement. This strategy has been met with resistance in the past, with courts rejecting J&J's two previous attempts to end the talc lawsuits through a subsidiary's bankruptcy.

Beasley Allen has voiced its opposition to the latest settlement proposal, arguing that it abuses U.S. bankruptcy law and does not provide adequate compensation to people who have developed cancer. The firm alleges that Smith's efforts to drum up votes for J&J's settlement violate the joint venture agreement, which stipulated that Beasley Allen would "be responsible for all client contact."

The lawsuit further alleges that Smith, an attorney who won the first talc trial against J&J in 2013, sought to partner with Beasley Allen and Porter Malouf to bring more cases against J&J. The agreement required Beasley Allen to shoulder 50% of the workload and costs of litigation, with Smith and Porter Malouf taking care of the other half. However, Smith allegedly failed to fulfill his end of the bargain, finding himself deep in debt to litigation funders after buying out Porter Malouf's responsibilities without informing Beasley Allen.

The lawsuit also accuses Smith of secretly keeping some talc clients for himself, instead of bringing them to the joint venture. Beasley Allen has named Porter Malouf as a defendant in its lawsuit, alleging that it failed to fulfill its responsibilities under the joint venture agreement.

According to Beasley Allen's complaint, J&J has alleged that The Smith Law Firm owes as much as $240 million to its funders. Beasley Allen also claims that Smith owes $1.1 million for litigation expenses fronted by Beasley Allen in the joint venture.