Johnson & Johnson Plunges 3.03% After Texas Judge Rejects Bankruptcy Plan

On April 1, 2025, Johnson & Johnson's stock dropped 3.03% 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 The company has also withdrawn approximately $70 billion in reserves set aside for the bankruptcy settlement.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 financial gain.

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.