A federal judge has ruled that Johnson & Johnson shareholders could file a class-action lawsuit against the company, accusing the company of fraudulently concealing the contamination of its talc products with cancer-causing asbestos.
U.S. District Judge Zahid Quraishi of Trenton, New Jersey, on Friday allowed shareholders from Feb. 22, 2013, through Dec. 13, 2018, to proceed collectively with their securities fraud lawsuits.
He rejected J&J’s argument that any class period should be at least a year shorter because certain events that allegedly caused its stock price to fall contained no “new” information.
J&J’s talc products include its iconic baby powder. The company stopped selling talc-based baby powder globally this year, switching to corn starch as its main ingredient. It said its talc products are safe and do not contain asbestos.
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“Johnson & Johnson always strives to provide truthful and complete information,” Erik Haas, J&J’s global vice president of litigation, said in a statement. “We will continue to vigorously litigate cases that call into question the safety of our product or the accuracy of our public statements.”
Attorneys for the shareholders, including the lead plaintiff, the San Diego County Employees Retirement Association, did not immediately respond to requests for comment.
Class actions allow shareholders to recover more money, at a lower cost, than if they filed an individual action. A longer appeal period could increase the amount recovered.
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Shareholders said J&J’s stock price fell six times in late 2017 and 2018 following events that confirmed how the New Brunswick, New Jersey-based company and various executives hid the truth about asbestos in its talc products.
These events included a jury awarding $4.69 billion in July 2018 to 22 women who said asbestos caused them to develop ovarian cancer, and a Reuters report five months later that J&J has known about asbestos risks for decades.
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J&J said the six events could not have harmed its stock price because none contained new information “correcting” its prior disclosures.
The only new information from the verdict is that jurors accepted the women’s arguments and that the 56 internal documents mentioned in the Reuters report were already public.
Quraishi was not convinced. Addressing the Reuters report, he said its “careful analysis” and provision of “necessary context” made it more than just a repetition of “outdated information.”
The stock price fell 10% the day the report was released.
J&J also faces massive tort litigation including more than 50,000 lawsuits over its talc products.
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Courts have rejected two attempts by the company to use bankruptcy proceedings to limit its exposure to talc-related litigation.
The case is Hall v. Johnson & Johnson et al, United States District Court, District of New Jersey, No. 18-01833.
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