Alison Frankel

Judge tosses suit against J&J board: law blocks accountability

Alison Frankel
Oct 5, 2011 14:02 UTC

In August, when Johnson & Johnson disclosed its deal to resolve criminal allegations that it falsely marketed the potent schizophrenic drug Risperdal, I said that if ever a board was ripe for a big, fat shareholder derivative suit, it was J&J’s. The Risperdal settlement was the company’s third criminal plea in a little more than a year, on top of a Justice Department and Food and Drug Administration investigation of its over-the-counter children’s drugs, state attorneys general subpoenas, whistleblower suits, and product recalls. The 111-page consolidated complaint that Bernstein Litowitz Berger & Grossmann and Robbins Geller Rudman & Dowd filed against J&J’s board members last December offered more red flags than a training school for toreadors.

Judge Freda Wolfson of New Jersey federal court agreed in a Sept. 30 opinion that the allegations the plaintiffs firms had raised were “troubling and pervasive,” noting in particular that claims the board ignored systemic illegal conduct were “disconcerting to the court.” Near the end of the ruling, after analyzing all of the shareholders’ assertions, the judge cited “what appears to be serious corporate misconduct on J&J’s part.”

And then she threw out the case.

Judge Wolfson found that the shareholders’ complaint didn’t offer sufficiently specific evidence that individual board members were aware of problems at the company and nevertheless failed to do anything. “None of the various types of red flags suggest that the board acted in bad faith,” the judge wrote. “Adding all of those allegations together does not lead me to a different conclusion in this case. While plaintiffs’ allegations are disconcerting, they do not contain the [requisite] detail.”

I could retread the judge’s examination of each and every one of the assertions Bernstein Litowitz and Robbins Geller raised, explaining why the judge found their evidence insufficient. I could point out Judge Wolfson’s apparent irritation with the plaintiffs firms for failing to quote specifics from the J&J regulatory filings they cite. (“It is not the court’s obligation to wade through pages of documents to locate the language plaintiffs seek to invoke,” she wrote.) Or I could explain the debate over whether the allegations against J&J should be weighed in the aggregate or one at a time.

But I think it’s more valuable to consider the big picture. Judge Wolfson’s dismissal of the J&J case before shareholders even had a chance to conduct discovery suit proves exactly what I argued in a recent column: the law makes it virtually impossible to hold corporate board members accountable through shareholder litigation.

Who will lead J&J hip replacement MDL?

Alison Frankel
Aug 25, 2011 22:40 UTC

In the next day or two, W. Mark Lanier of the Lanier Law Firm will file a letter with Dallas federal judge Ed Kinkeade outlining the reasons why he should lead what Lanier believes will become a huge mass tort: the multidistrict litigation over DePuy’s Pinnacle hip replacements. More than 300 personal injury suits accusing the Johnson & Johnson unit of failing to warn patients about design defects in the best-selling product have been filed in federal courts around the country and consolidated before Judge Kinkeade. Lanier made a preemptive play to take charge of the MDL, proposing that he and a handful of other well-known mass tort veterans head up a broadly inclusive plaintiffs steering committee. But instead, in an August 10 order, Judge Kinkeade threw open the leadership contest with a call for plaintiffs firms to respond to a long list of questions about their experience in big cases.

“It’s an interesting situation,” Lanier told me. “You’ve got the usual crew of mass tort lawyers who’ve done this rodeo time and time again. And then you’ve got a new crew of Dallas lawyers who are looking to be in leadership roles because they know the judge, know the Dallas system.”

Lanier’s allies include Edward Blizzard of Blizzard McCarthy & Nabers; Richard Arsenault of Neblett Beard & Arsenault; Kenneth Seeger of Seeger Salvas; and Paul Hanly of Hanly Conroy Bierstein Sheridan Fisher & Hayes. Blizzard told me that coalition is holding together, “but what I took from Judge Kinkeade is that he’s going to make his own decision.” The judge, who has never before presided over an MDL, has said he may even interview candidates to lead the case.