On Friday, a Texas judge declined to halt an upcoming shareholder payout by Texas Attorney General Ken Paxton to restrict Kenvue Inc.'s (NYSE:KVUE) handling and marketing of Tylenol amid ongoing litigation over the product's safety for pregnant women.
The ruling allows Kenvue to proceed with its planned dividend while the broader dispute continues.
In October, Paxton filed a lawsuit against Johnson & Johnson (NYSE:JNJ) and Kenvue, accusing the companies of misleading pregnant women about the safety of Tylenol despite evidence suggesting its 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 being aware of research linking prenatal exposure to acetaminophen with higher incidences of Autism Spectrum Disorder (ASD) and Attention-Deficit Hyperactivity Disorder (ADHD).
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His office sought to temporarily block the company from paying a $398 million dividend on November 26, arguing that the funds should remain available for potential claims related to the litigation.
Judge LeAnn Rafferty of Panola County District Court declined to grant the request, Reuters reported. In a brief, one-page order issued Friday, Rafferty concluded that she lacked jurisdiction over the dividend matter. The decision effectively cleared the way for Kenvue to distribute the payment.
The ruling marks a notable shift in tone from a local court confronted with a multinational company's internal decisions, signaling judicial reluctance to intervene in core corporate operations.
Earlier this month, Kimberly-Clark Corporation (NASDAQ:KMB) agreed to acquire Kenvue at an enterprise value of about $48.7 billion.
State attorneys had also argued that Kenvue should be barred from promoting Tylenol as safe for pregnant women while the case proceeds. The court, however, declined to impose such restrictions at this stage, leaving the company's current marketing practices intact.
Following the hearing, Kenvue attorney Kim Bueno told Reuters that jurisdiction was a decisive factor, given that the company is headquartered in New Jersey and incorporated in Delaware. "There was no jurisdiction to challenge that," she said, emphasizing that Texas lacked authority over the dividend decision.
When asked whether Kenvue would move forward with the payout, Bueno confirmed that the company intended to proceed. "Yes, absolutely, as they should," she said. "That is a distribution that’s being made as part of the normal course of business."
Paxton's lawsuit remains active, and the state continues to press its claims regarding Tylenol's safety profile.
Price Action: KVUE is up 0.18% at $16.69 during the premarket session at the last check on Monday.
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