A Texas jury ordered Johnson & Johnson to pay more than $1 billion to patients who claimed the company hid flaws in its Pinnacle artificial hips that had to be surgically removed.
The ruling is Johnson & Johnson's second loss linked to the implants.
Officials of Johnson & Johnson's DePuy unit, which makes the Pinnacle hips, knew the devices were defective but failed to properly warn doctors and patients about the risk they would fail, the federal jury in Dallas concluded Thursday. The verdict includes more than $30 million in actual damages for the six plaintiffs and more than $1 billion in punitive damages, according to court filings.
Johnson & Johnson still faces almost 9,000 lawsuits accusing the company of mishandling the metal-on-metal hips. Johnson & Johnson stopped selling the devices in 2013 after the U.S. Food and Drug Administration toughened artificial-hip regulations.
At $1.04 billion in damages, it's the third-largest overall jury award of 2016, according to data compiled by Bloomberg. The largest, for $3 billion, came in June in a breach of contract case brought by Hewlett-Packard Co. against Oracle Corp. The punitive award against Johnson & Johnson was the largest against a company this year, according to Bloomberg data. Such punishment damages are intended to dissuade defendants from continuing sanctioned practices.
"The jury is telling J&J that they better settle these cases soon," said Mark Lanier, who represented the group of six hip patients who sued Johnson & Johnson and DePuy. "All they are doing by trying more of these cases is driving up their costs and driving the company's reputation into the mud."
The DePuy unit acted appropriately in designing and testing the product, spokesman Mindy Tinsley said in a statement. The companies have strong grounds for appeal and remain committed to the long-term defense of the lawsuit allegations, according to the statement.
Lawyers for Johnson & Johnson said U.S. District Judge Ed Kinkeade's rulings barred the company from providing "a fair presentation to the jury."
"Now the appellate court will need to review errors" made by the judge, attorney John Beisner said in an emailed statement. The company will ask Kinkeade not to schedule any more trials until the appellate review is completed, he said.
The verdict continues a losing stretch for Johnson & Johnson before U.S. juries. Six of the seven largest product-defect verdicts in the U.S. this year have been against Johnson & Johnson units, including three in lawsuits claiming its talc products cause ovarian cancer.
Johnson & Johnson won the first Pinnacle hip case to go to trial in October 2014 after a jury rejected a Montana woman's claims that the devices were defective and gave her metal poisoning. In March, a Dallas jury ordered Johnson & Johnson to pay $502 million to a group of five patients who accused the company of hiding defects in the hips. A judge cut that verdict in July to about $150 million.
The Pinnacle devices weren't covered by New Brunswick, N.J.-based Johnson & Johnson's $2.5 billion settlement covering its ASR line of artificial hips. In 2010 Johnson & Johnson recalled 93,000 of those implants worldwide, saying 12 percent failed within five years.
Because the six hip recipients who sued Johnson & Johnson were all California residents, that state's law governs the handling of punitive damages awarded in the case. California has no cap on punishment awards, so it may be difficult for the company to argue that this part of the verdict should be reduced under state law.
The U.S. Supreme Court has said such bad-conduct awards must be proportional to compensatory damage verdicts that underlie them and has limited punitive verdicts to 10 times a plaintiff's actual damages.
The company still faces 8,900 suits over Pinnacle hip failures, according to a May filing with the U.S. Securities and Exchange Commission. That figure is up from 8,300 suits the company listed in an October 2015 regulatory filing.
The patients in the cases before Kinkeade alleged their DePuy hips leached cobalt and chromium material into their bloodstreams, leading to the device failures and surgical removal. They claimed Johnson & Johnson officials knew their metal-on-metal design would cause such injuries but pushed ahead with the product.
The plaintiffs also contend that DePuy officials rushed the Pinnacle hips to market with little testing and ignored studies that showed metal-on-metal prosthetics posed a deterioration risk for human tissue and bone.
Kinkeade has scheduled another test trial involving claims by 10 hip recipients for September 2017, according to court filings.
Despite its pledge to appeal Thursday's verdict, Johnson & Johnson shouldn't wait for an outcome to approach hip patients with settlement offers, said Erik Gordon, a University of Michigan law professor, who teaches classes about how drugs and medical devices are developed and regulated.
"They may think they have good defenses to these claims, but they don't seem to be working with juries," Gordon said in an interview Thursday. "There's no easy way out of these cases now that they have a billion-dollar verdict against them. They better start thinking of how they can settle these claims before the price goes up any more."
Information for this article was contributed by Margaret Cronin Fisk of Bloomberg News.
Business on 12/03/2016