Johnson & Johnson's subsidiary bankruptcy strategy facing third rejection, talcum powder lawsuit suffers setback again.

On Monday, a federal judge in Texas rejected Johnson & Johnson's (JNJ.US) third attempt to have its created subsidiary declare bankruptcy to address tens of thousands of lawsuits alleging that the company's talcum powder caused cancer. The proposal aimed to dismiss lawsuits alleging that its baby powder and other talcum powder products led to ovarian cancer, marking the third time the company's bankruptcy strategy has failed in court. Johnson & Johnson had claimed that the plan had the support of 83% of claimants, higher than the 75% required by US bankruptcy laws. Under the plan, the subsidiary Red River Talc would declare bankruptcy and then receive around $9 billion to pay the claimants, rather than through legal proceedings. After a two-week trial in Houston, US Bankruptcy Court Judge Christopher Lopez rejected this, stating that there were flaws in the claimants' vote. Lopez criticized Johnson & Johnson, saying the company "provided an unreasonably short voting period for thousands of creditors, and did whatever it could to reach the 75% threshold." Johnson & Johnson did not appeal, but instead stated that they would resort back to the tort system. They will also retrieve around $7 billion in reserve funds from the bankruptcy resolution. Johnson & Johnson's Global Litigation Vice President Erik Haas said in a statement, "We have decided to litigate each and every claim because the simple fact is that these are false allegations fabricated by greedy plaintiff attorneys seeking out another deep-pocket defendant and being driven by lawyer advertising fueled by litigation funding." Johnson & Johnson will hold a conference call on Tuesday morning at 8 am Eastern Time to discuss their future plans. The company had previously tried twice to use the so-called "Texas two-step" bankruptcy strategy, but was rejected both times by a judge in New Jersey, where Johnson & Johnson is headquartered.