• 15
  • August
    2011

In our last post, we began looking at two recent shareholder suits against the board of directors at Johnson & Johnson concerning legal troubles faced by the company in recent years.

Those troubles, as we mentioned, involved settlements and investigations over off-label marketing of drugs, illegal overseas bribery, and production problems with over-the-counter medications. At the heart of the suits is the contention that the J&J board failed to properly respond to illegal practices in the company.

In recent oral arguments for a motion to dismiss one of the suits, plaintiffs in that case argued that the J&J board was failed to take action despite a large amount of evidence of wrongdoing. In response, the board argued that the allegations referred to involve events spanning many years and that the issues concerned a wide variety of the company's divisions. The board's attorney essentially argued that they didn't have control of the types of details involved in the allegations. In response to that, the attorney representing the shareholders argued that the board is responsible for the type of illegal practices involved in the allegations, and that the fact that multiple sources were informing the board of illegal practices should have led it to take some kind of action.

The judge in charge of that case hasn't yet ruled on the motion to dismiss, but she did find that the shareholder group that served a demand letter on the J&J board may not intervene in the suit. If the judge chooses not to dismiss the case, the board may face two substantial shareholder suits.

Source: Thomson Reuters, "Thinking of suing J&J board? Too late-case is already underway," Alison Frankel, August 10, 2011.