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Johnson & Johnson agrees to pay $22.9 million to end recall lawsuit

By Jessica Dye

NEW YORK (Reuters) - Johnson & Johnson has agreed to pay $22.9 million to end a lawsuit from investors who claimed the company concealed quality-control failures that culminated in a broad recall of children's medicines, according to court filings.

The proposed settlement was filed Monday in a U.S. federal court in New Jersey, and must be approved by the judge overseeing the case. Johnson & Johnson did not admit any liability or wrongdoing in the settlement, court filings said.

"We maintain that the claims in this action are without merit, and settled this case in order to avoid the expense, distraction and time associated with continuing litigation," Johnson & Johnson spokesman Ernie Knewitz said in a statement.

Johnson & Johnson took more than 40 nonprescription products off store shelves in 2010, including Children's Tylenol, in what the U.S. Food and Drug Administration has characterized as the largest recall of children's medicine in the agency's history.

The recalls came after FDA inspectors found multiple problems at the company's Fort Washington, Pennsylvania, plant, including bacterial contamination of ingredients and filthy equipment. The facility was later shut down.

Shareholders filed a proposed class action against the company several months later, saying Johnson & Johnson cut back on quality-control measures prior to the recalls, and took steps to conceal that from investors and the public. Once the extent of the recalls came to light, share prices fell, investors said.

The company was also accused of trying to avoid publicity by concealing facts about the recalls, including the orchestration of a "phantom recall" of Motrin products, in which third-party contractors covertly removed suspect containers from stores.

The proposed settlement "provides a substantial benefit to the class and is a favorable result," plaintiffs said in the court filing.

(Reporting by Jessica Dye; Editing by Edwina Gibbs)

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