AUSTIN (KXAN) — The Texas Office of Attorney General, or OAG, asked a Panola County court on Wednesday to block a Texas company from paying out dividends to investors while its lawsuit against the company is pending.
The OAG’s Consumer Protection Division filed the lawsuit on Oct. 27. It accuses Johnson & Johnson and Kenvue of “failing to warn consumers” about an unfounded connection between Tylenol’s main ingredient and medical conditions of autism spectrum disorder (ASD) and attention deficit hyperactivity disorder (ADHD). It also accused Johnson & Johnson of fraudulent transfer of liabilities when it spun off Kenvue.
The Wednesday motion accuses both defendant companies of further violating those statutes since the filing.
“They continue to falsely assure Texans that Tylenol is entirely safe—contrary to the specific instructions of the federal health authorities and indeed the President of the United States himself—doubling down on DTPA (Deceptive Trade Practices Act) violations that endanger the health of scores of Texas’s children,” the motion says. “And Kenvue has announced its intention to pay a massive dividend—which it cannot afford given its massive liabilities—thereby further violating the TUFTA (Texas Uniform Fraudulent Transfer Act).”
According to Panola County court records, the company was served with the lawsuit after it announced on Oct. 29 that it intended to pay out quarterly dividends to shareholders on Nov. 12. It last paid out dividends to shareholders in August.
Johnson & Johnson and Kenvue were both served the lawsuit on Nov. 4, six days after that announcement, according to court records. The court reported that it received the return of service on Nov. 5, with the OAG filing its motion later that day.
The OAG claimed in its motion that the dividend announcement was made in response to the lawsuit, saying that Kenvue was “thumbing its nose at this freshly filed lawsuit.”
“It would have the effect of taking corporate funds that will be needed to pay creditors —including the State of Texas itself — and giving those funds to Kenvue’s shareholders, who are not parties to this suit, and from whom the State would never be able to recover,” the motion says. “The Court must protect Texas and other creditors from Kenvue’s attempt to disrupt the financial pecking order.”
It also claims that the total damages in the case would be in the billions, if the OAG wins the case — a total cost that would render the company insolvent.
“It is entirely reasonable for the State of Texas to be concerned that Kenvue will not be able to satisfy a judgment even if Kenvue does nothing to enrich its shareholders with dividends they are not entitled to,” the motion says. “Faced with enormous liabilities — from this suit and others— Kenvue has announced its intention to distribute some $400 million from its treasury to shareholders who are not the subject of this lawsuit.”
Neither Kenvue nor Johnson & Johnson has filed responses with the court yet. KXAN reached out to the companies again on Thursday to ask for their response to the OAG’s motion.
What Kenvue has said
The company’s latest quarterly report said that the company had not yet officially been served the lawsuit. That report was filed on Nov. 3, seven days after Paxton’s office filed the lawsuit.
The company also noted in the report that “at this stage in these proceedings,” it couldn’t “reasonably estimate the likelihood or magnitude of potential liability arising from this matter.”
Quarterly reports are required by the U.S. Securities and Exchange Commission (SEC) for any publicly traded company, Kenvue included. These are lengthy documents (Kenvue’s latest is 97 pages) that serve to inform a company’s shareholders of its health and prospective risks to their investment. A company’s chief financial officer and chief accounting officer are required to sign it.
On the same day of the report, Kimberly-Clark announced it would acquire Kenvue in a multibillion-dollar merger. It’ll require regulatory approval from the federal government, but the company said it expects to complete the deal “in the second half of 2026.”
A conference call with investors discussing the acquisition was held at 8 a.m. on Nov. 3. During the call, a Barclays analyst asked about the pending litigation against the company and how it may affect the deal.
Kimberly-Clark CEO Mike Hsu said the company’s board of directors “carefully considered all of the risks and all the opportunities,” according to a transcript of the call filed with the SEC.
“We had multiple sessions with the Board, with the world’s foremost scientific, medical, regulatory and legal experts,” Hsu said. “And so going through that process multiple times, I think the work confirmed that this is a generational value creation opportunity for both companies.”
Kenvue CEO Kirk Perry said on the call that he couldn’t speak directly to the lawsuits.
“But what I can say is there is nothing that is more important to us and the health of the people who use our products,” said Perry, per the transcript. “We stand firmly behind the science and the safety of our products. I mean, these things have been studied for decades, and we continue to stand by that science as the medical community does, as well.”
If the acquisition goes through, Kimberly-Clark will assume legal liability for pending lawsuits against Kenvue.
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