A US bankruptcy court judge denied Johnson & Johnson’s (JNJ) third attempt to resolve the ongoing $10 billion talc litigation suit late Monday.
J&J vice president of litigation, Erik Haas, said Tuesday the company had gained support for the settlement from 85% of plaintiffs when a minimum of 75% was needed.
Judge Christopher Lopez in the Southern District of Texas said the company achieved that number through improper means and doesn’t consider half of those “yes” votes valid.
J&J has been fighting litigation from more than 60,000 plaintiffs since the early 2010s. The plaintiffs allege that the company’s baby powder and other talc products contained asbestos and caused ovarian cancer. The company has repeatedly denied the allegations, claiming the products are safe. In the 1970s, the company did find asbestos in its talc and did not disclose it to the FDA.
J&J stock fell 5% at the market open on Tuesday.
Chief financial officer Joe Wolk told investors on a call Tuesday morning that the development in the case does not change the company’s “conviction” in its financial outlook. And the company was putting $7 billion back into the company’s coffers.
“Considering this was our best and final offer, we are reversing $7 billion we previously held for the bankruptcy plan. It’s important to remember that last year alone, Johnson & Johnson generated $20 billion in free cash flow,” Wolk said.
Read more about Johnson & Johnson stock and today’s market action.
“Today’s court docket suggests that at least half of these votes were ruled as invalid as they relied on power of attorney that was not supported due to an unreasonably short time for claimants to vote and/or improper reliance on general language in engagement letters,” JPMorgan analysts wrote in a note to clients Monday.
J&J rebuffed the judge’s claim and said it would continue to fight the case. This was the company’s third attempt.
“Rather than pursue a protracted appeal, the Company will return to the tort system to litigate and defeat these meritless talc claims,” J&J said in a statement Tuesday.
The company previously faced two rejections in New Jersey under the subsidiary LTL Management. In the previous instance, the judge said that bankruptcy wasn’t the correct route to settle the case since J&J was not under threat of actually going bankrupt.
“The rejected $8B settlement represented 2% of JNJ’s market cap of $400B,” Leerink Partners analysts wrote in a note to clients Monday.
