Supreme Court rules Johnson & Johnson must pay $2.1 billion in baby powder lawsuit

The company has set aside nearly $4 billion as a “litigation expense.”

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Supreme Court has effectively upheld a ruling that Johnson & Johnson (NYSE: JNJ) must pay a significant award to a group of women in a high-profile lawsuit. The court chose not to consider the company's objections to the ruling, leaving Johnson & Johnson obligated to pay $2.1 billion.

The lawsuit concerned the company's baby powder, which the plaintiffs alleged was contaminated with carcinogenic asbestos. A jury in St. Louis found in favor of the petitioners, who were ultimately awarded that $2.1 billion as a group. The amount is the sixth-largest award in the history of the American legal system.

While this is a stinging legal defeat for Johnson & Johnson, the company has planned for its financial impact. In February, it announced it was setting aside a "litigation expense" of $3.9 billion to fund the compensatory damages.

The company must contend with a raft of other cases related to its baby powder; it said in that February announcement that it faces thousands more lawsuits from onetime users of the product. In an article on the Supreme Court decision published Tuesday, Bloomberg said the number of those cases exceeds 26,000.

In a statement quoted by the news agency, Johnson & Johnson spokeswoman Kim Montagnino wrote about the Supreme Court's move that "The decision by the court to not review the case leaves unresolved significant legal questions that state and federal courts will continue to face."

She added, "The Supreme Court has many times said its decision to deny hearing a case expresses no view on the merits [of a case]."

On Tuesday, Johnson & Johnson stock fell by 2.2%, while the S&P 500 index essentially traded sideways.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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