TLDR:
- U.S. bankruptcy judge rejected J&J’s $10 billion settlement proposal for talc lawsuits
- This marks the third failed bankruptcy attempt by J&J to resolve talc litigation
- J&J shares fell more than 3% following the ruling
- Company will not appeal but plans to fight claims in court
- J&J maintains its products are safe and don’t cause cancer
J&J’s third attempt to resolve tens of thousands of lawsuits through bankruptcy has failed. The company had sought to end claims alleging its baby powder and other talc products cause ovarian cancer.
On Monday, U.S. Bankruptcy Judge Christopher Lopez in Houston rejected Johnson & Johnson’s $10 billion proposal. He ruled that the company did not belong in bankruptcy.
“While the Court’s decision is not an easy one, it is the right one,” Lopez wrote in his decision. The judge found the proposed settlement lacked sufficient support from women who alleged J&J products caused their cancer.
The judge also determined the settlement went too far in releasing legal claims against entities that hadn’t filed for bankruptcy. This included retailers that sold J&J products and Kenvue, a consumer health business that J&J spun off in 2023.
Lopez criticized the votes J&J collected from plaintiffs’ attorneys. He noted serious flaws in votes cast both for and against the plan. J&J claimed 83% support from plaintiffs, but Lopez said “at least half should not be counted.”
The judge found that J&J “unnecessarily rushed” the votes. Some lawyers voted without clear authority from their clients. Others claimed client consent but provided no proof of consultation.
Following the ruling, J&J announced it would not appeal. However, the company stated it had “no intention of settling the claims.” Instead, it plans to “return to the tort system to litigate and defeat these meritless talc claims.”
Opponents of the deal argued that J&J, as a wealthy company, should not use bankruptcy to prevent cancer victims from having their day in court. They maintained the company is not in “financial distress.”
J&J faces over 60,000 lawsuits alleging its talc products contained asbestos and caused cancer. The settlement would have ended these lawsuits and prevented similar cases in the future.
The company has consistently maintained its products are safe. J&J says its talc does not contain asbestos and does not cause cancer. The company stopped selling talc-based baby powder in the U.S. in 2020, switching to a cornstarch formula.
Market Reaction
Investors reacted negatively to the news. J&J shares fell more than 3% on Tuesday following the announcement. The stock dropped to $160.08 in premarket trading.
Despite this setback, J&J stock has gained about 14.7% year-to-date through Monday’s close. The company has a market capitalization of roughly $400 billion.
J&J shares currently trade at 15.51 times expected earnings over the next 12 months. This compares to 14.9 times for rival Amgen and 9.7 times for Merck.
Legal Implications
Andy Birchfield, an attorney representing plaintiffs opposed to the bankruptcy settlement, called J&J’s strategy “nothing more than a bad-faith maneuver to avoid full accountability.”
“With this ruling, we are now moving forward without delay to trial, where our clients will finally have the chance to present their cases before a jury,” Birchfield stated.
Under the rejected settlement, J&J had estimated ovarian cancer patients would receive between $75,000 and $150,000. The exact amounts would have depended on injury severity and the number of claims covered.
Before this third bankruptcy attempt, J&J had separately settled lawsuits alleging its products caused mesothelioma. This is a rare form of cancer associated with asbestos exposure.
The company is expected to hold a conference call to discuss the ruling. This marks another chapter in J&J’s ongoing legal battles over its talc products.
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