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A Corporate Law Takeaway From Judge Nelson's Ruling In Talcum Powder Case

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After a three week trial that included extensive expert testimony, a Los Angeles jury returned a $417 million verdict against Johnson & Johnson ($68 million non-economic and $340 million punitive damages) and its subsidiary Johnson & Johnson Consumer, Inc. ($2 million non-economic and $7 million punitive damages).  Johnson & Johnson Talcum Powder Cases, Los Angeles Superior Court Case No. BC628228.  The plaintiff was a middle-aged woman who had been diagnosed with ovarian cancer after more than a half century of talcum powder use.  The plaintiff tried the case on theory of negligent failure to warn.  Last week, Judge Maren Nelson, granted judgment non obstante veredicto. 

Although attracting national attention, Judge Nelson's decision may not seem to befit the subject matter of this blog.  Nonetheless, corporate lawyers may want to take note of at least one portion of her lengthy (70+ page) order.  It seems that Johnson & Johnson stopped making its talcum powder product in 1967 and that its subsidiary, JJCI, thereafter manufactured the products at issue in the case.  The plaintiff argued that because Johnson & Johnson called no witnesses to show that its "involvement" with the products ended in 1967, the jury could infer that Johnson & Johnson was liable for the failure to warn.  Judge Nelson rejected this argument on the basis that the plaintiff had the burden of proof on the issue.  Citing Sonora Diamond Co. v. Superior Court, 83 Cal. App. 4th 523 (2000), she wrote:

The law is well-established that a holding company ordinarily cannot be held liable for the acts of its wholly owned subsidiary absent a showing of agency or alter ego liability.

Although possible, it is not at all likely that Judge Nelson's ruling will be the last word in this litigation.  Whether final or not, her ruling is a reminder to both plaintiffs and defendants that the separate legal statuses of a parent and subsidiary corporations should not be overlooked.

 

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Maren Nelson, talcum powder, Corporate Governance, Alter Ego, Echeverria, Johnson & Johnson, subsidiary

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