A U.S. bankruptcy court in Texas has rejected Johnson & Johnson’s subsidiary Red River Talc's request to approve its prepackaged bankruptcy plan. The company said the plan included one of the largest settlements in mass tort bankruptcy history and was backed by most claimants.

In October 2024, the  Department of Justice’s unit argued that Johnson & Johnson’s latest bankruptcy maneuver is a bad-faith attempt to shield itself from billions in personal injury claims without actually entering bankruptcy.

Instead of appealing the decision, Red River Talc will return to the court system to fight what it calls baseless talc-related lawsuits.

The company claims that disclosures during the bankruptcy process confirmed the litigation is driven by plaintiff lawyers, based on flawed science and funded by outside investors, including foreign sovereign wealth funds.

Also Read: Justice Department’s Trustee Program Alleges Johnson & Johnson’s Talc Litigation Bankruptcy Bid Is Bad-Faith Tactic To Avoid Liability

As a result, the company has no plans to settle and will reverse about $7 billion previously set aside for legal costs.

“The Court has unfortunately allowed a couple of law firms with financially conflicted motives, who have conceded they have not recovered a dime for their clients in a decade of litigation, to defeat the overwhelming desire of claimants. As we have repeatedly stated, in the absence of plan confirmation, we will vigorously present our case in the tort system, starting with the adjudication of the motions pending in the Multi-District Litigation to exclude plaintiffs’ experts and to disqualify the lead counsel for its unethical breaches,” said Erik Haas, Worldwide VP of Litigation, Johnson & Johnson ( JNJ ). “We prevailed in 16 of 17 ovarian cases tried in the last 11 years and will devote our efforts to defeating these fake claims.”

“Today’s decision highlights the broken tort system in the United States. The company reiterates that none of the talc-related claims against it have merit and attempts to resolve this litigation were aimed at moving past this issue,” Haas continued. “The decision to litigate every filed case is based on the simple fact that this is a fake claim created by greedy plaintiff lawyers looking for another deep pocket to sue and fueled by litigation-financed attorney advertising.”

In September, Johnson & Johnson ( JNJ ) reportedly increased its settlement offer by $1 billion, now totaling about $9 billion, to address claims that its talc baby powder caused gynecological cancer.

Price Action: JNJ stock is down 3.48% at $160.07 during the premarket session at the last check Tuesday.

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