A judge won't block the maker of Tylenol from distributing $400 million of dividends to its shareholders amid Texas Attorney General Ken Paxton's lawsuit against the company.
Kenvue, the company that makes Tylenol, will proceed with issuing the payment on Nov. 26, according to reporting from Reuters. "That is a distribution that's being made as part of the normal course of business," the lawyer for Kenvue told Reuters.
The lawyer also said Texas has "no jurisdiction" to block Kenvue's dividend, since the company is based in New Jersey and incorporated in Delaware.
The state of Texas last month sued Kenvue, claiming it failed to inform consumers about the risk of having a child with autism if they took the medication while pregnant. Major medical associations said Paxton's allegation overstated the unsettled science surrounding a possible link between autism and Tylenol.
Paxton asked Judge LeAnn Rafferty in Panola County to block the payments, arguing the company may need that $400 million to pay out its legal liabilities if the state wins its case. The state's lawyers acknowledged it was an "extraordinary request," and one that legal experts say is extremely uncommon at such an early stage in a lawsuit.
Corporations typically have wide authority over how they handle their shareholder dividends, and state intervention is rare. But Texas brought its claims under a narrow exception to that rule, a state law that stops companies on the brink of insolvency from paying shareholders with funds that may be needed to pay creditors.
Paxton's office filed the lawsuit in Panola, a county of about 22,000 people on the border with Louisiana. Trump won the county by 67 points in 2024. Rafferty, a Republican who has been on the bench since 2016, is the county's sole judge.
A spokesperson for Kenvue said before the recent decision that the company was taking immediate legal action to stop the state from "continuing to drive these reckless and scientifically unsound theories."
"These politically and financially motivated actions will have a detrimental impact on public health for our consumers in this state," the spokesperson said in a statement. "We will do everything in our power to stand up for sound, credible science."
Forcing Kenvue to hold its payment could have had a detrimental impact on the company.
This lawsuit came just a month after U.S. Health Secretary Robert F. Kennedy Jr. announced plans to change drug labels to warn pregnant women against taking Tylenol, or its generic, acetaminophen. While some large studies have shown a correlation between taking Tylenol and having a child with autism, others that look more closely at genetic factors or sibling outcomes have repudiated those findings.
The day after Paxton filed his lawsuit, Kennedy walked back some of his and President Donald Trump's more definitive statements, saying the evidence on Tylenol "is not sufficient to say it definitely causes autism. But it's very suggestive." He recommended that women consult with their physicians to decide which medications to take.
But that has not slowed the crusade for Paxton, who is running to unseat U.S. Sen. John Cornyn in next year's Republican primary.
"I will not allow Big Pharma to ruin the lives of Texans with their lies and then refuse to pay the bill when it's brought to account," Paxton said in a statement when he filed his motion to stop the payment.
The filing also asked the judge to stop Kenvue from airing advertisements that claim Tylenol is safe to consume while pregnant.
Kenvue's stock has fallen 30% since Trump and Kennedy's comments, and the company is currently in negotiations for consumer products giant Kimberly-Clark to acquire it for $40 billion, a relative discount for the slate of products it oversees.
A ruling that barred the company from paying dividends to shareholders was expected to plummet its stock price even further, potentially encouraging the company to settle the lawsuit, said James Spindler, a corporate law professor at the University of Texas at Austin.
"This would put a lot of pain on the company in the short term," Spindler said. "The only real reason to own [stock in a] corporation is because it pays dividends, and if it can't pay dividends, no one would ever want to buy it."
This aggressive push against a major multinational corporation stands at odds with Texas GOP leaders' push to lure more businesses to the state through promises of a friendly legal climate for businesses. In 2023, the Legislature created specialized business courts to offer "predictability and certainty" to corporations, as Gov. Greg Abbott put it.
This case happened in a local court, although litigation to enable the company to pay its shareholders their dividends might have fallen under a business court jurisdiction. But it's easy to see why Paxton's office, at least, would like to keep this in the local courts, Spindler said.
Dozens of people have filed personal injury lawsuits against Johnson and Johnson, and its corporate spin-off, Kenvue, alleging adverse neurodevelopment outcomes for their children after taking Tylenol while pregnant.
Ashley Keller, a private attorney the state hired to handle this case, previously said in a statement that he had hoped Rafferty would "see through Kenvue's smokescreen and grant our injunction."
Keller is also overseeing dozens of consolidated lawsuits against Kenvue and its parent company, Johnson and Johnson, brought by parents who believe their child's autism was caused by Tylenol.
Lindsey Byman contributed to this story.
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This article first appeared on The Texas Tribune.
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