Sometimes a court case is really about the law, and sometimes it's about whether a Texas judge has any business telling a New Jersey company what to do with its dividend checks. Friday's ruling in Panola County District Court fell firmly into the latter category.
Judge LeAnn Rafferty shut down Texas Attorney General Ken Paxton's bid to freeze Kenvue Inc. (KVUE)'s planned $398 million shareholder payout, concluding she simply didn't have jurisdiction over the matter. The one-page order cleared the way for Kenvue to distribute the funds as planned, despite ongoing litigation over whether the company misled pregnant women about Tylenol's safety.
The Core Allegations
Back in October, Paxton filed suit against Johnson & Johnson (JNJ) and Kenvue, accusing both companies of deceptive marketing practices around Tylenol. The lawsuit centers on acetaminophen, the active ingredient in Tylenol, and research suggesting prenatal exposure may increase the risk of Autism Spectrum Disorder and Attention-Deficit Hyperactivity Disorder in children.
According to Paxton's office, Johnson & Johnson "deceptively marketed" Tylenol as a safe pain reliever for pregnant women while being aware of studies linking acetaminophen exposure to higher incidences of ASD and ADHD. The state argued that the $398 million dividend scheduled for November 26 should remain with the company to cover potential claims if the litigation succeeds.
The attorney general's team also pushed for immediate restrictions on how Kenvue promotes Tylenol, specifically asking the court to bar the company from marketing it as safe for pregnant women while the case plays out. Judge Rafferty declined both requests.
Jurisdiction Becomes The Deciding Factor
The ruling highlights a fundamental tension between state enforcement powers and corporate structure. Kenvue is headquartered in New Jersey and incorporated in Delaware, which became the pivotal detail in Friday's decision.
Kenvue attorney Kim Bueno told Reuters after the hearing that jurisdiction was decisive. "There was no jurisdiction to challenge that," she said, emphasizing that Texas lacked authority over the dividend decision. When asked whether the company would proceed with the payout, Bueno didn't hesitate: "Yes, absolutely, as they should. That is a distribution that's being made as part of the normal course of business."
The decision signals judicial reluctance to insert local courts into the core financial operations of multinational corporations, particularly when those companies maintain their legal domiciles elsewhere.
What Happens Next
While Kenvue can now distribute its dividend and continue marketing Tylenol without immediate restrictions, Paxton's lawsuit remains very much alive. The state continues pressing its claims about the product's safety profile and the adequacy of warnings provided to pregnant consumers.
The case also unfolds against a shifting corporate backdrop. Earlier this month, Kimberly-Clark Corporation (KMB) agreed to acquire Kenvue at an enterprise value of approximately $48.7 billion, adding another layer of complexity to the company's future operations.
For now, though, the dividend dispute is settled. Kenvue shareholders will get their $398 million, and the broader questions about Tylenol marketing and safety disclosures will continue through the Texas courts without freezing the company's cash distributions.
Price Action: KVUE stock rose 0.18% to $16.69 during Monday's premarket session.