In a groundbreaking decision, a federal judge has granted permission for Johnson & Johnson shareholders to unite in a class action, alleging that the company engaged in fraudulent concealment regarding the contamination of its talc products with cancer-causing asbestos.
U.S. District Judge Zahid Quraishi, presiding in Trenton, New Jersey, announced the approval on Friday, extending the class action period from February 22, 2013, to December 13, 2018, allowing shareholders to collectively pursue securities fraud claims.
Despite J&J’s attempts to shorten the class period by a year, arguing that certain events leading to stock price declines did not reveal “new” information, the judge dismissed the plea. Johnson & Johnson’s talc products, notably its iconic baby powder, have been at the center of controversy. The company ceased global sales of talc-based baby powder this year, opting for corn starch as the primary ingredient, maintaining the safety of its talc products, refuting asbestos contamination claims.
Erik Haas, J&J’s worldwide vice president of litigation, asserted, “Johnson & Johnson always strives to provide truthful and fulsome disclosures,” adding that the company will vigorously contest cases challenging product safety or statement accuracy.
Legal representatives for shareholders, including lead plaintiff San Diego County Employees Retirement Association, have yet to comment.
Class actions offer shareholders a more cost-effective avenue to recover funds compared to individual lawsuits. A prolonged class period could potentially result in a higher monetary recovery.
Shareholders allege that J&J’s stock experienced six declines in late 2017 and 2018, coinciding with events that purportedly exposed the company’s concealment of asbestos in its talc products. These events include a substantial jury award in July 2018 and a Reuters report five months later, revealing J&J’s awareness of asbestos risks spanning decades.
J&J argued that the events did not impact its stock price, contending that they contained no new information to “correct” prior disclosures. However, Judge Quraishi disagreed, emphasizing the Reuters report’s meticulous analysis and contextual relevance, leading to a 10% stock price drop on the day of its release.
In addition to this class action, J&J confronts mass tort litigation, encompassing over 50,000 lawsuits related to its talc products. Attempts by the company to use bankruptcy proceedings to limit talc litigation exposure have been rejected by the courts.
The case is identified as Hall v Johnson & Johnson et al, U.S. District Court, District of New Jersey, No. 18-01833.
