Johnson & Johnson (J&J) has faced thousands of lawsuits in recent years relating to harms suffered from its line of talcum powder products. This litigation resulted in major expenditures by the company for settlements, jury verdicts, and litigation costs. Since 2009, juries have found J&J liable for billions of dollars in damages in thousands of civil lawsuits involving talcum powder products. The talc litigation centers on the fact that J&J was aware of the association of talcum powder and an increased risk of ovarian cancer for decades. J&J knew that the talc it sold had asbestos in it, but J&J never provided any warning to the public. Now, J&J is also facing numerous lawsuits from investors alleging they have lost millions on their investments due to J&J’s failure to disclose the hazards of its products.
One of those suits, a class action filed against J&J, its CEO (Alex Gorsky), and its CFO (Dominic J. Caruso) in February 2018, alleges that all persons who purchased or acquired publicly traded J&J stock from 2013 to 2018 were harmed by J&J’s knowing failure to disclose the truth about the talc litigation. Pursuant to Section 10(b) of Securities and Exchange Act of 1934, it is illegal for a company or person to omit to state or misrepresent material facts to persons in connection with the offer or sale of a security.
As a publicly traded company, J&J filed documents regarding its business operations with the Securities and Exchange Commission (SEC) and issued press releases and reports to the investing public, which they knew would be relied upon by investors. By failing to acknowledge, and sometimes even lying about, critical evidence against J&J in the talc litigation, these statements misled public investors. As a result, every investor who purchased stock in J&J paid more than they would have had the talc dangers been disclosed.
J&J has moved to dismiss the suit, but a filing by the Plaintiff in opposition to that motion sets forth some chilling allegations of knowledge on J&J’s part. J&J has consistently stated that the talc is safe and has “always” been free of asbestos. However, internal J&J documents show that corporate leadership has been aware for years that there is no way to state that its talc could not contain asbestos.
J&J also touted its testing of talc for asbestos, but the pleading notes evidence that the company recognized the possibility of contamination and intentionally adopted a testing method that would be unable to detect asbestos even if it was present.
Even in the face of multi-billion-dollar verdicts in the talc litigation, J&J’s public strategy has been deny, deny, deny – even when it possesses information that contradicts that position, including the fact that it was aware of “unavoidable trace amounts” of asbestos in its talc as early as 1969 and knew that disclosure could result in reputational damage and massive litigation.
The same corporate executives who continue to minimize and deny talc risks are paid millions in company stock and option benefits. When those shares are earned, and later often sold on public markets, investors pay more than they would have, had the seriousness of the talc litigation been fully disclosed. Meanwhile, the executives receive more for their shares than they otherwise would. If you need more information or have comments, contact James Eubank, a lawyer in our firm’s Consumer Fraud & Commercial Litigation Section.
The case is Hall v. Johnson & Johnson et al., (case number 3:18-cv-01833) in the U.S. District Court for the District of New Jersey.
This story appears in the August issue of The Jere Beasley Report. For more like it, or to subscribe, visit the Report online.