Johnson & Johnson shares tumble on reports talc unit bankruptcy case dismissed by appeals court

Johnson & Johnson's (NYSE: JNJ) share price has plunged after a report by The Wall Street Journal stated that the company's talc unit wasn't in financial distress.

As a result, the case is said to have been thrown out by a federal appeals court.

Johnson & Johnson had planned to use a legal strategy to push around 38,000 (Bloomberg reports over 40,000) talc lawsuits into bankruptcy court, a controversial tactic used by companies to move mass personal injury cases to chapter 11.

However, the WSJ says a federal appeals court decided Johnson & Johnson's LTL Management cannot use bankruptcy to resolve the numerous talc-injury lawsuits.

Johnson & Johnson shares are down more than 2% at the time of writing.

Bloomberg stated that a three-judge panel in Philadelphia sided with cancer victims, who stated that JNJ incorrectly put its specially created unit, LTL Management, under court protection to block juries from hearing the lawsuits.

As a result of the ruling, J&J must again defend itself against claims that contaminated talc in its baby powder causes cancer.

The company has previously lost several such cases and decided to develop a new legal strategy to block the cases from trial and force claimants to negotiate in the Chapter 11 case of LTL. The appeals court judged the bankruptcy, and Johnson & Johnson's strategy should be dismissed.

The news has also impacted 3M Co. (NYSE: MMM) shares which have fallen 1.85%. The company is also trying to use the tactic in regard to lawsuits over its defective combat earplugs.

By Sam Boughedda

You May Also Be Interested In

• Talc Plaintiffs Will Press to Reopen Litigation Against Johnson & Johnson (JNJ)
• Illumina (ILMN) Issues Statement in Response to Carl Icahn's Letter
• J&J to seek U.S. Supreme Court review on unit's bankruptcy