Johnson & Johnson Inc. shares are trading lower Tuesday after a U.S. bankruptcy court in Texas rejected subsidiary Red River Talc's request to approve its prepackaged bankruptcy plan.

What To Know: U.S. Bankruptcy Court Judge Christopher Lopez rejected Johnson & Johnson’s prepackaged bankruptcy plan on Tuesday, sending shares of the pharmaceutical giant tumbling.

The plan was designed to resolve talc-related cancer claims, which Johnson & Johnson ( JNJ ) argues are baseless and fueled by plaintiff lawyers and outside investors. The settlement was supported by the overwhelming majority of claimants, according to Johnson & Johnson ( JNJ ).

“The disclosures made under oath in the Red River bankruptcy affirmed that the talc litigation is a plaintiff-lawyer driven fake tort, premised on junk science and fueled by third party litigation financing including from foreign sovereign wealth funds. Consequently, the Company has no intent to settle or pay plaintiff lawyers on such meritless claims,” the company said.

Johnson & Johnson ( JNJ ) had previously set aside $7 billion for legal costs, but now plans to reverse that decision and fight the lawsuits in court.

Johnson & Johnson's ( JNJ ) legal team stated that the ruling allows a few law firms with "financially conflicted motives" to block what they claim was a fair settlement. The company noted that it has won 16 of the last 17 ovarian cancer cases and will continue its defense in the traditional court system.

The rejected bankruptcy plan is the latest in a series of attempts by Johnson & Johnson ( JNJ ) to limit its liability in the ongoing talc-related litigation. The Department of Justice previously argued that the company's bankruptcy maneuver was a bad-faith effort to shield itself from claims without fully entering bankruptcy. Despite increasing its settlement offer to $9 billion in September, the legal battle continues, contributing to investor concerns and the stock's decline.

JNJ Price Action: Johnson & Johnson ( JNJ ) shares were down 7.58% at $153.29 at the time of writing, according to Benzinga Pro.

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