As of March 2025, there are still 1,840 lawsuits pending in the Eastern District of New York multidistrict Exactech litigation (MDL) and roughly 700 in a consolidated Florida action. So, what happens now?Patients who have been harmed by defective Exactech joint replacements should expect three things:
- further delays;
- additional settlement pressure (occasioned by the delay, among other factors); and
- recoveries that may be smaller than originally estimated.
Chapter 11 basics
The Chapter 11 bankruptcy process is designed to allow a business to reorganize (often through a sale), resume operations and pay off its debts over time. The theory is that allowing a business to restructure and continue to function will ultimately allow its creditors to recover more of what they are owed than they would if the business liquidated its assets. Selling off assets (used desks, computers, manufacturing facilities, etc.) might not yield much.
Generally, if a defendant in an MDL is allowed to declare bankruptcy, a trust is set up to pay out any outstanding mass tort claims. The process almost universally results in smaller payouts to plaintiffs.
Persistent bad odor
Several recent Chapter 11 reorganizations of companies facing massive personal injury liabilities have left plaintiffs feeling that they have been hoodwinked by the legal system. They don’t pass the smell test.
Oxycontin deaths
For example, drug maker Purdue Pharma and its owners, the Sackler family, became notorious for their links to the opioid epidemic, which has been blamed for as many as 82,000 deaths. Purdue Pharma’s drug, OxyContin, was widely implicated in the crisis. By 2019 the company faced more than 1,000 lawsuits.
In that year, the Sackler family withdrew $11 billion from the company, filed for Chapter 11 bankruptcy, and placed $6 billion in a bankruptcy trust to pay off claims. The wealthy members of the Sackler family were to be relieved of all future criminal charges.
In August 2023, the U.S. Supreme Court blocked the scheme as an abuse of the bankruptcy process. Nonetheless, the lasting story was that wealthy individuals and financially healthy corporations were using loopholes in bankruptcy law to dodge legal liability.
Baby Powder, ovarian cancer and some fancy dancing
Johnson & Johnson has tried to use another variation on this scheme, known as the “Texas two-step,” to reduce its legal liability in its talcum powder/ovarian cancer lawsuits. In the last months of 2024, over 62,000 plaintiffs had filed J&J talc lawsuits, and attorneys expected another 50,000.
The first step in the legal dance involved creating a new subsidiary to which J&J transferred all tort claim liabilities. J&J created LTL Management for the sole purpose of housing anticipated debts. In September, it offered to fund the subsidiary in the amount of $10.1 billion. Step two involves the brand new LTL Management filing for Chapter 11 bankruptcy. Only the subsidiary’s $10.1 billion in assets would be used to pay off liabilities resulting from more than 100,000 lawsuits.
Ten billion dollars sounds like a lot of money, but to put it in perspective, J&J had total assets of $180.1 billion as of December 31,2024. That is enough to make a mere $10.1 billion look like lunch money.
To labor the obvious, people who have been injured by bad drugs or defective medical devices seem to come up short when bankruptcy law collides with mass tort lawsuits. This is a situation with which experience legal counsel may be able to help.
What’s next?
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Secondly, remember that bankruptcy courts have now had some experience with what appear to be business and litigation maneuvers that abuse the bankruptcy process.
The court may deny Exactech’s bankruptcy application. Exactech may then offer more money to the bankruptcy trust. This will take some time.
Finally, the cases may land back in the Eastern District of New York. At that point the process will pick back up where it was in the late summer of 2024, and settlement negotiations may begin in earnest.