Johnson and Johnson 2012 Annual Report Download - page 75

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 aforementioned 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 Committee 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 recommended: i) that Johnson &
Johnson reject the shareholder demands and take whatever steps are necessary or appropriate to secure dismissal 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. The Board of Directors of Johnson & Johnson unanimously adopted the Special Committee’s
recommendations, and in April 2012, the Board of Directors created the Regulatory, Compliance & Government Affairs
Committee.
In August 2011, two shareholders 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 into Copeland v. Prince. Johnson & Johnson secured an extension of time to respond to the
complaint.
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 current directors of Johnson & Johnson 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. Plaintiffs seek monetary damages, and the state court
plaintiffs also seek corporate governance reforms. The federal lawsuits were consolidated in July 2011 into In re J&J
FCPA Derivative Shareholder Litigation, 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 plaintiffs secured an extension of time to respond to the motion. The
state lawsuits were consolidated in November 2011 into In re J&J Shareholder Derivative Litigation, 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 and moved to dismiss on the ground that the plaintiffs failed to make a demand on
the Board of Directors. In May 2012, the Court granted a motion by Johnson & Johnson to stay the state lawsuits pending
resolution of In re J&J FCPA Derivative Shareholder Litigation.
In July 2012, the parties in each of the shareholder derivative cases pending in federal court discussed above (specifically,
In re Johnson & Johnson Derivative Litigation,Copeland v. Prince, and In re J&J FCPA Derivative Shareholder Litigation)
filed a Stipulation of Settlement to permanently resolve all of the actions in their entirety. In October 2012, the settlement
was approved by the Court. In November 2012, a notice of appeal was filed in the United States Court of Appeals for the
Third Circuit by a shareholder who objected to the approval of the settlement in the District Court on the grounds that the
lawsuit and the settlement did not provide any benefit to the Company, and that plaintiffs’ counsel had requested an
excessive fee award.
In June 2012, two other shareholders who had submitted a shareholder demand letter in March 2010, the New Jersey
Building Laborers Annuity and the New Jersey Building Laborers Pension Funds, filed an additional shareholder derivative
lawsuit in New Jersey Superior Court naming various current and former officers and directors as defendants and also
challenging the Board’s rejection of their demands. This shareholder derivative lawsuit purports to allege the same claims
that are the subject of the settlement described above. The parties to this action had entered into a consent order staying
the action pending final approval of the settlement discussed above. In November 2012, the plaintiffs agreed to voluntarily
dismiss the action.
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