Texas Lawyer Common Ken Paxton is asking a decide to dam the maker of Tylenol from distributing $400 million of dividends to its shareholders amid the state’s litigation in opposition to the corporate.
It’s an “extraordinary request,” the state’s attorneys acknowledge, and one which authorized consultants say is extraordinarily unusual at such an early stage in a lawsuit.
The state of Texas final month sued Kenvue, the corporate that makes Tylenol, claiming it failed to tell shoppers in regards to the danger of getting a toddler with autism in the event that they took the remedy whereas pregnant. Main medical associations say Paxton’s allegation overstates the unsettled science surrounding a attainable hyperlink between autism and Tylenol.
In a brand new submitting Thursday, Paxton argued the corporate may have that $400 million to pay out its authorized liabilities if the state wins its case.
Companies usually have vast authority over how they deal with their shareholder dividends, and state intervention is uncommon. However Texas is bringing its claims below a slender exception to that rule, a state legislation that stops corporations getting ready to insolvency from paying shareholders with funds which may be wanted to pay collectors.
Paxton’s lawsuit in opposition to Kenvue was simply filed final week. The decide has not but scheduled a preliminary listening to on the case, not to mention dominated on if and the way a lot the corporate could should pay.
“Presumably, there hasn’t been an enormous quantity of proof marshalled about this, so it might be comparatively troublesome to spitball whether or not the plaintiff is prone to win,” mentioned James Spindler, a company legislation professor on the College of Texas at Austin. “It will even be comparatively troublesome to spitball whether or not the corporate goes to be bancrupt if it makes its cost.”
A spokesperson for Kenvue mentioned the corporate was taking fast authorized motion to cease the state from “persevering with to drive these reckless and scientifically unsound theories.”
“These politically and financially motivated actions can have a detrimental affect on public well being for our shoppers on this state,” the spokesperson mentioned in a press release. “We’ll do every part in our energy to face up for sound, credible science.”
This lawsuit got here only a month after U.S. Well being Secretary Robert F. Kennedy Jr. introduced plans to alter drug labels to warn pregnant ladies in opposition to taking Tylenol, or its generic, acetaminophen. Whereas some giant research have proven a correlation between taking Tylenol and having a toddler with autism, others that look extra carefully at genetic elements or sibling outcomes have repudiated these findings.
The day after Paxton filed his lawsuit, Kennedy walked again a few of his and President Donald Trump’s extra definitive statements, saying the proof on Tylenol “will not be adequate to say it positively causes autism. But it surely’s very suggestive.” He really useful that ladies seek the advice of with their physicians to determine which medicines to take.
However that has not slowed the campaign for Paxton, who’s operating to unseat U.S. Sen. John Cornyn in subsequent 12 months’s Republican major.
“I can’t enable Large Pharma to smash the lives of Texans with their lies after which refuse to pay the invoice when it’s delivered to account,” Paxton mentioned in a press release.
The submitting additionally asks the decide to cease Kenvue from airing commercials that declare Tylenol is secure to devour whereas pregnant.
Kenvue’s inventory has fallen 30 p.c since Trump and Kennedy’s feedback, and the corporate is at the moment in negotiations with client merchandise large Kimberly-Clark to accumulate the corporate for $40 billion, a relative low cost for the slate of merchandise it oversees.
If the corporate is barred from paying dividends to shareholders, the inventory worth is anticipated to plummet even additional, probably encouraging the corporate to settle the lawsuit, Spindler mentioned.
“This may put plenty of ache on the corporate within the quick time period,” he mentioned. “The one actual purpose to personal [stock in a] company is as a result of it pays dividends, and if it may’t pay dividends, nobody would ever need to purchase it.”
This aggressive push in opposition to a serious multinational company stands at odds with Texas GOP leaders’ push to lure extra companies to the state by means of guarantees of a pleasant authorized local weather for companies. In 2023, the Legislature created specialised enterprise courts to supply “predictability and certainty” to firms, as Gov. Greg Abbott put it.
This case doubtless wouldn’t fall below the enterprise court docket jurisdiction, though litigation to allow the corporate to pay its shareholders their dividends would possibly. But it surely’s simple to see why Paxton’s workplace, at the least, wish to maintain this within the native courts, Spindler mentioned.
“When you have a sympathetic sort of declare, or a scandalous sort of declare, getting them in entrance of a jury is likely to be objective,” he mentioned. “You’re taking a look at probably big findings of damages for those who’re in a position to get this earlier than a jury, and the enterprise courts is likely to be extra prone to dismiss instances or to take issues away from the jury.”
Paxton’s workplace filed this go well with in Panola County, a county of about 22,000 individuals on the border with Louisiana. Trump received the county by 67 factors in 2024. The case will likely be heard by the county’s sole decide, LeAnn Rafferty, a Republican who has been on the bench since 2016.
Ashley Keller, a non-public lawyer the state employed to deal with this case, mentioned in a press release that he’s hopeful Rafferty will “see by means of Kenvue’s smokescreen and grant our injunction.”
Keller can be overseeing dozens of consolidated lawsuits in opposition to Kenvue and its mum or dad firm, Johnson and Johnson, introduced by dad and mom who imagine their baby’s autism was attributable to Tylenol.
There has not but been a listening to scheduled on Paxton’s newest submitting, though Keller mentioned they’ve requested an expedited timeline.
Disclosure: College of Texas at Austin has been a monetary supporter of The Texas Tribune, a nonprofit, nonpartisan information group that’s funded partly by donations from members, foundations and company sponsors. Monetary supporters play no function within the Tribune’s journalism. Discover a full record of them right here.
This text first appeared on The Texas Tribune.
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