Johnson and Johnson 2011 Annual Report Download - page 68

These shareholder derivative actions are similar in their claims
and collectively they assert a variety of alleged breaches of fiduciary
duties, including, among other things, that the defendants allegedly
engaged in, approved of, or failed to remedy or prevent defective
medical devices, improper pharmaceutical rebates, improper off-
label marketing of pharmaceutical and medical device products,
violations of current good manufacturing practice regulations that
resulted in product recalls, and that they failed to disclose the afore-
mentioned alleged misconduct in the Company’s filings under the
Securities Exchange Act of 1934. Each complaint seeks a variety of
relief, including monetary damages and corporate governance
reforms. Johnson & Johnson moved to dismiss these actions on the
grounds, inter alia, that the plaintiffs failed to make a demand upon
the Board of Directors. In September 2011, In re Johnson & Johnson
Derivative Litigation was dismissed without prejudice and with leave
to file an amended complaint.
Johnson & Johnson filed a report in the In re Johnson & Johnson
Derivative Litigation matter in July 2011, prepared by a Special Com-
mittee of the Board of Directors, which investigated the allegations
contained in the derivative actions and in a number of shareholder
demand letters that the Board received in 2010 raising similar
issues. The Special Committee was assisted in its investigation by
independent counsel. The Special Committee’s report recom-
mended: i) that Johnson & Johnson reject the shareholder demands
and take whatever steps are necessary or appropriate to secure dis-
missal of the derivative litigation and ii) that the Board of Directors
create a new Regulatory and Compliance Committee charged with
responsibility for monitoring and oversight of the Company’s Health
Care Compliance and Quality & Compliance systems and issues.
Johnson & Johnson’s Board of Directors unanimously adopted the
Special Committee’s recommendations. In August 2011, two share-
holders who had submitted shareholder demand letters in 2010
filed shareholder derivative lawsuits in the United States District
Court for the District of New Jersey naming various current and
former officers and directors as defendants and challenging the
Board’s rejection of their demands. In November 2011, the Court
consolidated these two cases. Johnson & Johnson has secured an
extension of time to respond to the complaint, and will, if necessary,
move to terminate these lawsuits on the basis of the Board’s
decision to adopt the Special Committee’s recommendations.
Two additional shareholder derivative lawsuits were filed in
May 2011 in the United States District Court for the District of New
Jersey, and two other shareholder derivative lawsuits were filed in
New Jersey Superior Court in May 2011 and August 2011, all
naming Johnson & Johnson’s current directors as defendants and
Johnson & Johnson as the nominal defendant. The complaints allege
breaches of fiduciary duties related to the Company’s compliance
with the Foreign Corrupt Practices Act and participation in the
United Nations Iraq Oil For Food Program, that the Company has
suffered damages as a result of those alleged breaches, and that the
defendants failed to disclose the alleged misconduct in the
Company’s filings under the Securities Exchange Act of 1934. Plain-
tiffs seek monetary damages, and one plaintiff also seeks corporate
governance reforms. The federal lawsuits were consolidated in July
2011, and an amended consolidated complaint was filed in August
2011. In October 2011, Johnson & Johnson moved to dismiss the
consolidated federal lawsuit on the grounds that the plaintiffs failed
to make a demand upon the Board of Directors. The state lawsuits
were consolidated in November 2011 and a consolidated complaint
was filed in December 2011. In January 2012, Johnson & Johnson
moved to dismiss or stay the state lawsuits pending resolution of
the federal lawsuit. In addition, Johnson & Johnson intends to
move to dismiss or stay the state lawsuits on the grounds that the
plaintiffs failed to make a demand on the Board of Directors.
In September 2011, two additional shareholder derivative law-
suits were filed in the United States District Court for the District of
New Jersey naming Johnson & Johnson’s current directors and one
former director as defendants and Johnson & Johnson as the nominal
defendant. These lawsuits allege that the defendants breached their
fiduciary duties in their decisions with respect to the compensation
of the Chief Executive Officer during the period from 2008 through
the present, and that the defendants made misleading statements in
Johnson & Johnson’s annual proxy statements. One of these lawsuits
has been voluntarily dismissed. An amended complaint has been
filed in the other. In December 2011, Johnson & Johnson moved to
dismiss the remaining lawsuit on the grounds that the plaintiff failed
to make a demand upon the Board of Directors.
Starting in May 2010, multiple complaints seeking class action
certification related to the McNeil recalls have been filed against
McNeil Consumer Healthcare and certain affiliates, including
Johnson & Johnson, in the United States District Court for the East-
ern District of Pennsylvania, the Northern District of Illinois, the
Central District of California, the Southern District of Ohio and the
Eastern District of Missouri. These consumer complaints allege gen-
erally that purchasers of various McNeil medicines are owed mone-
tary damages and penalties because they paid premium prices for
defective medications rather than less expensive alternative medica-
tions. All but one complaint seeks certification of a nation-wide class
of purchasers of these medicines, whereas one complaint, the Har-
vey case, seeks certification of a class of MOTRIN® IB purchasers
in Missouri. In October 2010, the Judicial Panel on Multidistrict
Litigation (JPML) consolidated all of the consumer complaints,
except for the Harvey case, which was consolidated in March 2011,
for pretrial proceedings in the United States District Court for the
Eastern District of Pennsylvania. In January 2011, the plaintiffs in
all of the cases except the Harvey case filed a “Consolidated
Amended Civil Consumer Class Action Complaint” (CAC) naming
additional parties and claims. In July 2011, the Court granted
Johnson & Johnson’s motion to dismiss the CAC without prejudice,
but permitted the plaintiffs to file an amended complaint within thirty
days of the dismissal order. In August 2011, the plaintiffs filed a
Second Amended Civil Consumer Class Action Complaint (SAC).
Johnson & Johnson moved to dismiss the SAC in September 2011.
This second motion to dismiss is pending.
Separately, in September 2011, Johnson & Johnson,
Johnson & Johnson Inc. and McNeil Consumer Healthcare Division
of Johnson & Johnson Inc. received a Notice of Civil Claim filed in
the Supreme Court of British Columbia, Canada (the Canadian Civil
Claim). The Canadian Civil Claim is a putative class action brought
on behalf of persons who reside in British Columbia and who pur-
chased various McNeil children’s over-the-counter medicines
during the period between September 20, 2001 and the present.
The Canadian Civil Claim alleges that the defendants violated the
Canadian Business Practices and Consumer Protection Act, and
other Canadian statutes and common laws, by selling medicines
that did not comply with Canadian Good Manufacturing Practices.
66 JOHNSON & JOHNSON 2011 ANNUAL REPORT