Mississippi Public Employees Retirement System filed a securities class action lawsuit against Boston Scientific, a manufacturer of medical devices, and a number of its executives, alleging that the defendants withheld information about problems with its coronary stents, and made misleading positive statements, in violation of the Securities Exchange Act. Boston Scientific manufactured a coronary stent that it sold in Europe beginning in January, 2003. Boston then obtained FDA approval for use of the stent in the U.S. in March, 2004. PERS contended that between those dates, Boston became aware of problems the stent caused for patients in Europe, and planned a manufacturing change which was not disclosed to the public. After the stent was introduced in the U.S., doctors reported similar problems, which Boston attributed to the doctors’ unfamiliarity with the product.
PERS contended that the defendants knew there was a manufacturing defect causing the balloons in the devices to not deflate. PERS further contended that the defendants purposely kept the information quiet to preserve its market share. After a series of injuries and deaths when the balloons failed to deflate, Boston announced a recall of the stents, to be replaced with those incorporating a manufacturing change, and its stock price dropped.
The District Court granted Boston’s motion to dismiss, finding that PERS failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995. PERS appealed the court’s ruling. On appeal, the First Circuit held that the evidence relating to the manufacturing change was arguably material. To make a long story short, the appeals court ruled that what Boston had done could be found to be misleading and there was sufficient evidence to go to the jury. The bottom line is the Court ruled that PERS had raised a jury question. The dismissal was sent back to the trial court.
Source: The Judicial View
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