If you look at the companies that have paid dividends for years or generations and raise their dividends, one of the names will be Johnson & Johnson. The company is in the health care business, if you go into homes across the world, you will find one or more of their products. They make products to look after all parts of the body and they have very profitable brands, it is a company you can buy almost anytime and hold for years to come. Having said all those wonderful things about the company, the company has a legal problem.

In an article by Nicole Sperling of the New York Times News Service, for the 2nd time this year, a judge has ruled against J&J’s effort to use a bankruptcy case to limit its exposure to tens of thousands of lawsuits that claim its talcum power products caused cancer.

The plaintiffs claim that the company knew for decades about the risks linked to its talc products including baby powder. The company has switched talc to corn starch.

J&J created a company called LTL Management in 2021 to shield itself from talc ligation. It proposed LTL would file for bankruptcy and pay $8.9 billion to resolve all the claims against it.

Judge Michael Kaplan of the US Bankruptcy Court for the District of New Jersey dismissed the case because the lawsuits did not put J&J in imminent or immediate financial distress. Earlier the US Court of Appeals for the 3rd Circuit in Philadelphia dismissed the first bankruptcy effort for the same reason.

Erik Haas, J&J’s worldwide VP of Litigation said we respectfully disagree with the bankruptcy’s conclusion and will appeal the ruling.

The case will continue to overhang the company.

A long time holder of J&J stock is Jim Cramer’s Charitable Trust and he sold the holdings until the appeals are done. Lawsuits consume a great deal of time of senior management and they need to be focused on their great brands and other health care solutions.

Linking to dividend paying stocks, if the lawsuit of J&J is settled, the company can continue to do all the good things consumers have expected over the past 100 plus years. From an investor point of view, all companies will be sued at one point or another, there is a reason there are legal departments and some of the biggest law firms in the city where the company is headquartered are paid a retainer fee. The issue on law suits is how much does it consume senior management time? if you think it is too much, it is best to find an alternative till the situation changes.

There are more questions than answers, till the next time – to raising questions.