Texas Attorney General Ken Paxton is asking a judge to block the maker of Tylenol from distributing $400 million of dividends to its shareholders amid the state’s litigation against the company.
It’s an “extraordinary request,” the state’s lawyers acknowledge, and one that legal experts say is extremely uncommon at such an early stage in a lawsuit.
The state of Texas last month sued Kenvue, the company that makes Tylenol, 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 say Paxton’s allegation overstates the unsettled science surrounding a possible link between autism and Tylenol.
In a new filing Thursday, Paxton argued the company may need that $400 million to pay out its legal liabilities if the state wins its case.
Corporations typically have wide authority over how they handle their shareholder dividends, and state intervention is rare. But Texas is bringing 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 lawsuit against Kenvue was just filed last week. The judge has not yet scheduled a preliminary hearing on the case, let alone ruled on if and how much the company may have to pay.
“Presumably, there hasn’t been a huge amount of evidence marshalled about this, so it would be relatively difficult to spitball whether the plaintiff is likely to win,” said James Spindler, a corporate law professor at the University of Texas at Austin. “It would also be relatively difficult to spitball whether the company is going to be insolvent if it makes its payment.”
A spokesperson for Kenvue said 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.”
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.
The filing also asks the judge to stop Kenvue from airing advertisements that claim Tylenol is safe to consume while pregnant.
Kenvue’s stock has fallen 30 percent since Trump and Kennedy’s comments, and the company is currently in negotiations with consumer products giant Kimberly-Clark to acquire the company for $40 billion, a relative discount for the slate of products it oversees.
If the company is barred from paying dividends to shareholders, the stock price is expected to plummet even further, potentially encouraging the company to settle the lawsuit, Spindler said.
“This would put a lot of pain on the company in the short term,” he 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 likely wouldn’t fall under the business court jurisdiction, although litigation to enable the company to pay its shareholders their dividends might. But it’s easy to see why Paxton’s office, at least, would like to keep this in the local courts, Spindler said.
“If you have a sympathetic type of claim, or a scandalous type of claim, getting them in front of a jury might be a good goal,” he said. “You’re looking at possibly huge findings of damages if you’re able to get this before a jury, and the business courts might be more likely to dismiss cases or to take matters away from the jury.”
Paxton’s office filed this suit in Panola County, a county of about 22,000 people on the border with Louisiana. Trump won the county by 67 points in 2024. The case will be heard by the county’s sole judge, LeAnn Rafferty, a Republican who has been on the bench since 2016.
Ashley Keller, a private attorney the state hired to handle this case, said in a statement that he is hopeful Rafferty will “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.
There has not yet been a hearing scheduled on Paxton’s latest filing, although Keller said they have requested an expedited timeline.
Disclosure: University of Texas at Austin has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
This article first appeared on The Texas Tribune.
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