A federal district court judge in Trenton, N.J., has dismissed a stock drop lawsuit filed by participants against Johnson & Johnson, New Brunswick, N.J., and retirement plan fiduciaries, who claimed plan executives should have taken steps to protect the assets of participants who had purchased company stock as a retirement investment.
"Plaintiffs have failed to plausibly allege an alternative action that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it," wrote U.S. Chief District Court Judge Freda Wolfson in an April 29 opinion.
"Plaintiffs have not alleged any specific circumstances which would have made earlier disclosure more prudent," she wrote. "Plaintiffs' failure to allege particularized facts in support of why earlier disclosure would have lessened the impact on the ERISA stock is a death knell to this particular theory."
She added that said plaintiffs have 45 days to file an amended complaint if believe "they may be able to allege to an adequate alternative action."
The case of Perrone et al. vs. Johnson & Johnson represents the consolidation of two cases filed last year alleging the defendants breached their fiduciary duties to participants in two company retirement plans: the Johnson & Johnson Savings Plan for Union Represented Employees and the Johnson & Johnson Retirement Savings Plan.
The former had assets of $90.5 million for the fiscal year ended Dec. 31, 2017. In early 2018, it merged with another J&J 401(k) plan. The latter had assets of $399.6 million as of Dec. 31, 2018. All asset data is from the company's latest 11-K statements.
Fiduciaries should have acted to protect in-plan shareholders after allegations, news articles and lawsuits emerged about the safety of the company's baby powder, one original complaint said. "A proper disclosure could have, and should have, been made in the regular course of Johnson & Johnson's securities filings," it said.
The company has maintained that the talc used in the baby powder doesn't contain asbestos and doesn't cause cancer.
According to the company's first quarter 10-Q statement filed Wednesday with the Securities and Exchange Commission, "personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. and Johnson & Johnson arising out of the use of body powders containing talc, primarily Johnson's baby powder. The number of pending product liability lawsuits continues to increase."
The regulatory filing noted that J&J " has successfully defended a number of these cases but there have been verdicts against the company, including a verdict in July 2018 for $4.7 billion. The company believes that it has strong grounds on appeal to overturn these verdicts."
J&J "has received preliminary inquiries and subpoenas to produce documents regarding these matters" from a Senate committee, a House subcommittee, the Department of Justice and the Securities and Exchange Commission, the filing said, noting, "The company is cooperating with government inquiries."