Johnson & Johnson Drops 3.01% After Texas Judge Rejects Bankruptcy Plan

Johnson & Johnson's stock dropped 3.01% in pre-market trading on April 1, 2025, following a significant legal setback. A federal judge in Texas rejected the company's third attempt to use a bankruptcy strategy to resolve tens of thousands of lawsuits alleging that its talc-based products, including baby powder, cause ovarian cancer.

The judge, Christopher Lopez, ruled that the voting process for the proposed settlement was flawed and that Johnson & Johnson had manipulated the system to gain support. The company had claimed that 83% of claimants supported the plan, which would have involved a subsidiary, Red River Talc, declaring bankruptcy and receiving approximately $90 billion to settle claims.

Johnson & Johnson has decided not to appeal the decision but will instead return to the tort litigation system. The company has also withdrawn approximately $70 billion in reserves set aside for the bankruptcy process. 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 legal defeat marks the third time Johnson & Johnson's "Texas two-step" bankruptcy strategy has failed. The company will hold a conference call on Tuesday to discuss its future plans. The ongoing legal battles and the rejection of the settlement plan are likely to continue to impact the company's stock performance and investor sentiment.