Johnson & Johnson Loses Oklahoma Opioid Case
An Oklahoma state judge ordered Johnson & Johnson to pay more than $572 million for its role in the state’s opioid crisis.
An Oklahoma judge ordered Johnson & Johnson to pay more than $572 million for its role in the state’s opioid crisis.
An Oklahoma judge ordered Johnson & Johnson to pay more than $572 million for its role in the state’s opioid crisis on Monday.
Speaking briefly before a packed courtroom, Cleveland County District Judge Thad Balkman said the state attorney general had shown the company’s “misleading marketing and promotion of opioids created a nuisance” and compromised the health of Oklahomans.
“Defendants caused an opioid crisis that is evidence by increased rates of addiction, overdose death, and neonatal abstinence syndrome in Oklahoma,” Balkman said.
Johnson & Johnson immediately said it planned to appeal the verdict, and condemned the judgment as “flawed.” The company said it would move to stay enforcement of the judgment until the appeal was resolved, which Johnson & Johnson said could take until 2021.
But despite the legal defeat, investors seem at least initially comfortable with the figure. Johnson & Johnson stock (ticker: JNJ) was up 1.9% in after hours trading, while shares of other defendants in opioid lawsuits, including Teva Pharmaceutical Industries (TEVA), Mallinckrodt (MNK), and Endo International (ENDP), also rose slightly.
Read more: Opioid Uncertainties Grew and Investors Headed for the Exits
“Five hundred and some odd million dollars is less than $17.2 [billion],” the amount that the state attorney general who brought the case had requested, said Thomas Cooke, a professor at the McDonough School of Business at Georgetown University.
The result is somewhat ambiguous: Not an unvarnished win for the plaintiffs, but clearly not a victory for the defendants, either. The amount is lower than the $1 billion that investors were expecting, according to Evercore ISI analyst Elizabeth Anderson’s Monday morning note. And Cowen analyst Joshua Jennings wrote Monday afternoon that investors had feared a judgment in “at least, the low single-digit billions, if not higher.”
Still, both Teva and private drugmaker Purdue Pharma paid far less in their settlements with Oklahoma. And both of those companies sold far more opioids in Oklahoma than Johnson & Johnson—though plaintiffs in this case also cited Johnson & Johnson’s ownership of two companies that sold the active ingredients used in other drugmaker’s opioids.
“Teva and Purdue had a higher share than JNJ, but yet JNJ is being asked to pay a much higher dollar amount,” said Patrick Trucchio, an analyst at Berenberg Capital Markets. “A player that is better capitalized is being asked to contribute more than what we would consider its fair share.”
Despite the enormous attention the trial has received, it’s a bit of an oddity among the more than 2,000 cases brought against companies involved in the opioid business. Those cases rest on a range of legal theories, including fraud, negligence, violation of the controlled substances act, and others.
When the Oklahoma case against Johnson & Johnson went to trial, however, it was based entirely on the claim that the company had created a public nuisance through its marketing and sale of opoid products.
Public nuisance claims are a “very ill-defined cause of action,” said Adam Zimmerman, a professor of law at Loyola Law School. It’s an “old-timey” cause of action, he said, and it remains unclear whether state appeals courts will agree that opioid lawsuits can be the basis for a nuisance claim.
But the success so far of the public nuisance claim could lead other plaintiffs to adopt the strategy. “I think it’s a theory that plaintiffs’ attorneys” will think about including, Cooke said.
Over the course of a two-month trial, Oklahoma’s attorney general argued that the company’s marketing efforts increased the demand for opioids, and contributed to the opioid crisis. The company, meanwhile, argued the two opioid products it sold made up a tiny proportion of the prescription opioids sold in the state. Oklahoma countered that Johnson & Johnson, until 2016, owned two companies that sold the active ingredients used in opioid medications to other drugmakers. Experts said the claim was a legal stretch, but Balkman seems to have accepted it.
That’s a sign that, if other judges follow Balkman’s lead, liability for opioid sales could travel farther up the supply chain than investors had thought.
“There’s really no limit as to how far that liability can spread,” Cooke said.
In a statement, Johnson & Johnson’s general counsel, Michael Ullmann, said the company’s subsidiary Janssen “did not cause the opioid crisis in Oklahoma, and neither the facts nor the law support this outcome.”
The question now is how the litigants in the massive federal proceeding, the opioid multidistrict litigation, will react to the decision.
In an interview shortly before the Oklahoma decision was announced, Carl Tobias, a professor at the University of Richmond School of Law, said a substantial settlement would send “a real signal” to other plaintiffs. “I think it’s bound to play back on the dynamics in the [multidistrict litigation].”
In a statement, the lead counsels of the plaintiffs’ executive committee said the decision confirms “what communities have been saying for some time: the opioid epidemic significantly interfered with public health.”
“While public nuisance laws differ in every state, this decision is a critical step forward for the more than 2,000 cities, counties, and towns we represent in the consolidation of federal opioid cases,” the lawyers added.
Write to Josh Nathan-Kazis at firstname.lastname@example.org
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.