On Friday, a Texas judge refused to halt an upcoming payout to shareholders by the Texas attorney general Ken Paxton to limit Kenvue Inc (NYSE:KVUE) treatment and marketing of Tylenol amid ongoing lawsuits over the product’s safety for pregnant women.
The ruling allows that Kenvue to continue with the planned dividend while the broader dispute continues.
In October, Paxton filed a lawsuit against Johnson & Johnson (NYSE:JNJ) and Kenvue, which accuses the companies of misleading pregnant women about the safety of Tylenol, despite evidence suggesting that the active ingredient, acetaminophen, may increase the risk of autism and attention disorders in children.
According to Paxton’s office, Johnson & Johnson “deceptively marketed” Tylenol as a safe pain reliever for pregnant women, while aware of research linking prenatal exposure to acetaminophen with a higher incidence of autism spectrum disorder (ASD) and attention-deficit hyperactivity disorder (ADHD).
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His office tried to temporarily block the company from paying a $398 million dividend on Nov. 26, arguing that the money should remain available for potential claims related to the lawsuit.
Panola County District Court Judge LeAnn Rafferty declined to grant the request, Reuters reported. In a brief one-page order issued Friday, Rafferty concluded she had no jurisdiction over the dividend issue. The decision effectively cleared the way for Kenvue to distribute the payment.
The ruling marks a notable change in tone from a local court confronted with the internal decisions of a multinational, signaling the judicial reluctance to intervene in companies’ core activities.
Earlier this month, Kimberly Clark Corporation (NASDAQ:KMB) agreed to acquire Kenvue for an enterprise value of approximately $48.7 billion.
State attorneys had also argued that Kenvue should be banned from promoting Tylenol as safe for pregnant women while the case continues. However, the court declined to impose such restrictions at this stage, leaving the company’s current marketing practices intact.
After the hearing, Kenvue attorney Kim Bueno told Reuters that jurisdiction was a deciding factor as the company is headquartered in New Jersey and incorporated in Delaware. “There was no jurisdiction to challenge that,” she said, emphasizing that Texas had no say in the dividend decision.
When asked if Kenvue would move forward with the payout, Bueno confirmed the company planned to go ahead. “Yes, absolutely, as it should be,” she said. “That is a distribution that is done as part of the normal course of business.”
Paxton’s lawsuit remains active and the state continues to push its claims regarding Tylenol’s safety profile.
Price promotion: KVUE is up 0.18% in the premarket session at $16.69 at last check on Monday.
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