A US bankruptcy judge has rejected Johnson & Johnson’s latest attempt to resolve tens of thousands of cancer claims through a $10bn settlement, marking the company’s third failed effort to use bankruptcy proceedings to limit liability over its talc products.
In a ruling handed down Monday, Judge Christopher Lopez of the Southern District of Texas said Johnson & Johnson (NYSE:JNJ) did not belong in bankruptcy and that its proposed settlement lacked sufficient support from the plaintiffs. The decision blocks J&J’s plan to resolve over 60,000 lawsuits alleging its talc-based baby powder caused ovarian cancer due to asbestos contamination.
“While the Court’s decision is not an easy one, it is the right one,” Lopez wrote.
The judge criticised the process by which J&J obtained votes from claimants, noting that many were cast without proper authorisation. Although the company said it had 83% support for the deal—well above the 75% threshold required—Lopez found that “at least half” of the votes should not be counted due to flawed procedures.
J&J said it would not appeal the ruling but confirmed it would not settle the claims either. Instead, it plans to return to the tort system to fight each case individually. “This is a fake claim created by greedy plaintiff lawyers looking for another deep pocket to sue,” said Erik Haas, the company’s worldwide vice president of litigation.
The company had attempted to use a controversial bankruptcy strategy often referred to as the “Texas two-step,” in which liabilities are shifted to a subsidiary that then files for bankruptcy protection. J&J had proposed funding the subsidiary with up to $10bn to resolve all current and future claims. Previous efforts to use this method were rejected in courts in New Jersey in 2021 and 2023.
Judge Lopez also objected to the deal’s attempt to release legal claims against third parties, including Kenvue—the consumer health business spun off by J&J in 2023—and retailers that sold the products, despite none of them filing for bankruptcy.
The company has long denied that its products contain asbestos or cause cancer. It stopped selling talc-based baby powder in the US in 2020, switching to a corn starch formula. However, litigation has continued, fuelled in part by earlier internal documents showing the company had identified asbestos in talc in the 1970s without disclosing it to the FDA.
Plaintiffs’ lawyers welcomed the ruling. “J&J’s bankruptcy strategy was nothing more than a bad-faith manoeuvre to avoid full accountability,” said Andy Birchfield, who represents cancer victims opposing the plan. “We are now moving forward without delay to trial.”
J&J estimated that under the rejected settlement, ovarian cancer claimants would have received between $75,000 and $150,000 depending on the severity of their illness and the number of successful claims. It had previously settled mesothelioma cases separately.
The company said it would reverse $7bn previously allocated for the bankruptcy plan. Chief Financial Officer Joe Wolk told investors on Tuesday that the move does not affect the company’s financial outlook. “Last year alone, Johnson & Johnson generated $20bn in free cash flow,” he said.
Shares in Johnson & Johnson have fallen 7.03% to US$154.16.
