Dec 28 A U.S. federal appeals court on Wednesday
revived a lawsuit accusing Medtronic Plc of defrauding
shareholders by covering up negative side effects from its
Infuse bone growth product.
The 8th U.S. Circuit Court of Appeals in St. Paul, Minnesota
said a lower court judge erred in finding that the plaintiff
shareholders sued too late, waiting more than two years after
learning information that could suggest an intent to defraud.
Medtronic and its lawyers did not immediately respond on
Wednesday to requests for comment.
The plaintiffs include the West Virginia Pipe Trades Health
and Welfare Fund, the Employees' Retirement System of the State
of Hawaii and Germany's Union Asset Management Holding AG. Their
lawyers did not immediately respond to requests for comment.
Medtronic developed Infuse as an alternative to bone grafts.
While U.S. regulators approved its use in 2002 for some
spinal fusion surgeries, doctors soon began prescribing it
widely for unapproved uses, which eventually comprised 85
percent of sales.
But on June 28, 2011, an issue of The Spine Journal said
clinical studies by doctors with financial ties to Medtronic
understated Infuse's risks.
Then in October 2012, a report from the U.S. Senate Finance
Committee found that Medtronic was "heavily involved" in shaping
the content of such studies.
The shareholders said this deception inflated Medtronic's
stock price, and caused them to suffer hundreds of millions of
dollars of losses as the truth came out.
Writing for the appeals court, Circuit Judge Raymond
Gruender said shareholders might have had reason to be
suspicious before The Spine Journal issue was published.
But he said reasonable shareholders could have inferred
merely that problems with the studies resulted not from fraud,
but from "the nature of corporate-sponsored research."
Gruender also rejected Medtronic's claim that the
shareholders failed to properly allege that they relied on the
company's alleged misconduct.
"A company cannot instruct individuals to take a certain
action, pay to induce them to do it, and then claim any causal
connection is too remote when they follow through," he wrote.
"In this way," the judge continued, "Medtronic's alleged
manipulative conduct directly caused the biased clinical trial
results that the market relied upon."
Medtronic is now based in Ireland, but has offices in
In March 2012, the company agreed to pay $85 million to
settle a separate shareholder lawsuit accusing it of concealing
the extent of Infuse's off-label use. (here)
The case is West Virginia Pipe Trades Health & Welfare Fund
et al v. Medtronic Inc et al, 8th U.S. Circuit Court of Appeals,
(Reporting by Jonathan Stempel in New York; Editing by