A federal judge in Trenton, New Jersey, has ruled that shareholders of Johnson & Johnson (J&J) can proceed with a class-action lawsuit accusing the company of fraudulently concealing the contamination of its talc products with cancer-causing asbestos. U.S. District Judge Zahid Quraishi allowed shareholders who held J&J stock from February 22, 2013, to December 13, 2018, to pursue their securities fraud claims as a group.
J&J had argued for a shorter class period, claiming that some events that caused its stock price to drop did not provide new information. However, Judge Quraishi rejected this argument. J&J’s talc products, including its widely recognized baby powder, have been at the center of controversy. The company ceased global sales of talc-based baby powder this year and switched to corn starch as the main ingredient, maintaining that its talc products are safe and asbestos-free.
Erik Haas, J&J’s worldwide vice president of litigation, emphasized the company’s commitment to providing truthful disclosures and stated that they would vigorously defend against cases challenging product safety or the accuracy of public statements.
According to the shareholders, J&J’s stock price experienced six declines between late 2017 and 2018 due to events confirming that the company and its executives had concealed information about asbestos in their talc products. These events included a jury awarding $4.69 billion to 22 women in July 2018, who claimed that asbestos exposure led to their ovarian cancer. Additionally, a Reuters report published five months later revealed that J&J had known about the asbestos risks for decades.
J&J argued that these events did not impact its stock price because no new information was presented that corrected previous disclosures. The company contended that the only new information from the jury verdict was that the jurors accepted the women’s arguments, and the 56 internal documents mentioned in the Reuters report were already public.
However, Judge Quraishi disagreed with J&J’s position, stating that the Reuters report provided a careful analysis and necessary context, making it more than a repetition of stale information. The release of the report caused a 10% drop in J&J’s share price.
In addition to the shareholder class action, J&J is facing over 50,000 lawsuits related to its talc products. The company has previously attempted, but failed, to use the bankruptcy process to limit its exposure to talc litigation.
