For the second time, Johnson & Johnson (NYSE:JNJ) has seen its attempt to resolve an avalanche of lawsuits that its talc baby powder and other talc-based products caused cancer rebuffed in bankruptcy court.
A federal bankruptcy judge in New Jersey ruled that the second bankruptcy filing from J&J subsidiary LTL Management must be dismissed, saying the company was not in imminent financial distress.
Shares of J&J fell 3.6% Monday morning to $168.14.
Essentially, J&J offloaded its talc products into LTL Management, which then filed for Chapter 11 bankruptcy protections.
A US appeals court rejected its first bankruptcy filing, and now the company is 0-for-2.
LTL Management intends to appeal the decision, arguing the ruling applied too harsh a standard.
“The Bankruptcy Code does not require a business to be engulfed in ‘flames’ to seek a reorganization supported by the vast majority of claimants,” said Erik Haas, J&J’s worldwide vice president of litigation.
The double decision also creates questions about a proposed $8.9 billion settlement that would stop new lawsuits from being filed. The company faces tens of thousands of suits but previously said that more than 60,000 claimants had committed to approving the settlement.
All the while, J&J still contends that research and clinical evidence have shown that its talc products are safe.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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