Two of three lawsuits against Dabur in US dismissed: Explained

Dabur India's subsidiaries, Namaste Laboratories LLC and Dermoviva Skin Essentials Inc, have been dismissed as defendants in a lawsuit filed in the United States District Court for the Northern District of Illinois, the company said in a filing on Wednesday, November 16. The lawsuit alleged that the use of hair relaxer products manufactured by these subsidiaries, along with others, caused ovarian and uterine cancers and other health issues.

The dismissal was based on the lack of personal jurisdiction, as neither Namaste nor Dermoviva had any involvement in manufacturing, marketing, distributing, or selling hair relaxer products in the United States. This marks a significant development in the ongoing litigation, bringing some relief to the Indian consumer goods firm.

The lawsuit, part of a Multi-District Litigation (MDL) involving about 5,400 cases, consolidated several claims against various companies, including Dabur's subsidiaries. The allegations against these subsidiaries were rooted in consumer accusations that certain hair relaxer products contain chemicals leading to severe health issues.

Dabur India, in its filings, reiterated that Namaste, Dermoviva, and Dabur International Ltd (DINTL) have consistently denied liability, asserting that the allegations are based on an "unsubstantiated and incomplete study." The company has retained legal counsel to defend its subsidiaries throughout the litigation process.

Despite the dismissal of Namaste and Dermoviva, Namaste Laboratories LLC remains a defendant in the ongoing lawsuits. Dabur clarified that the lawsuit doesn't involve any of its brands, and the parent company is not a party to these suits. Sales of Namaste's hair relaxer products constitute less than 1 per cent of Dabur India's total consolidated turnover.

The dismissal comes on the heels of comments from legal representatives of Dabur and Namaste, suggesting that plaintiffs might struggle to establish a direct link between Namaste's hair relaxer products and the alleged health issues. Namaste expressed confidence in the safety of its products and maintained its position that the lawsuits lack legal merit.

In light of the ongoing legal battles and the potential impact on financials, Dabur India disclosed that defense costs for the litigation are expected to breach the materiality threshold in the near future. The company also highlighted that Namaste has product liability insurance cover to address potential damages, claims, and defense costs arising from the litigation.

As the case progresses through the early stages of litigation, the focus remains on how the remaining defendant, Namaste Laboratories LLC, will navigate the legal challenges ahead, and whether the plaintiffs can substantiate their claims against the company in the courtroom.

Dabur India shares rose 1.54 per cent on Thursday, November 17, to touch an intraday high of Rs 534.15 apiece on the NSE.