Johnson & Johnson Plunges 3.08% After Texas Judge Rejects Bankruptcy Plan

On April 1, 2025, Johnson & Johnson's stock dropped 3.08% in pre-market trading.

Johnson & Johnson faced a significant setback as a federal judge in Texas rejected the company's third attempt to resolve tens of thousands of lawsuits alleging that its talc-based products, including baby powder, cause ovarian cancer. The proposed plan involved creating a subsidiary, Red River Talc, to declare bankruptcy and allocate approximately $90 billion to settle the claims. However, Judge Christopher Lopez ruled that the voting process among claimants was flawed and criticized Johnson & Johnson for manipulating the process to meet the required threshold.

Johnson & Johnson has decided not to appeal the decision and will instead return to the tort litigation system. The company has also withdrawn approximately $70 billion in reserves set aside for the bankruptcy settlement. Erik Haas, Vice President of Global Litigation at Johnson & Johnson, stated that the company will vigorously defend against each lawsuit, asserting that the claims are baseless and driven by greedy plaintiffs' lawyers seeking deep-pocketed defendants.

This ruling marks the third failure of Johnson & Johnson's "Texas two-step" bankruptcy strategy, which aims to use a subsidiary's bankruptcy to shield the parent company from liability. The company will hold a conference call on Tuesday to discuss its future plans.