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Medtronic Seeks Dismissal Of Shareholder Lawsuits

A two-person committee appointed by the med-tech giant concluded that allegations against Medtronic’s leaders are “without merit”; it’s now seeking dismissal of shareholder lawsuits.

Medtronic Seeks Dismissal Of Shareholder Lawsuits

In 2012, after Medtronic was accused of improperly marketing a controversial bone-growth product called Infuse, some shareholders demanded that the company investigate whether its leaders breached their fiduciary duties.

The Fridley-based company in turn formed a “special litigation committee,” comprising a retired Minnesota judge and a corporate law professor from the University of Minnesota.

That team was charged with investigating allegations against Medtronic and its leaders. The U.S. Food and Drug Administration in 2002 approved Infuse for specific uses, but the company was subsequently accused of manipulating Infuse studies and marketing the product for "off-label" uses.

Shareholder lawsuits alleged that Medtronic's officers and directors, in order to boost the company’s sales, designed and executed a “scheme” to evade regulations that prohibit promotion of off-label uses, according to Medtronic’s regulatory filing. They demanded legal action against Medtronic leaders.

Now, after its two-person “special litigation committee” spent about 18 months conducting an “exhaustive independent investigation” of the claims, it found them without merit and has determined that demands for legal actions are not in the company’s best interest, Medtronic said. Furthermore, the committee is seeking dismissal of pending shareholder lawsuits.

The committee’s complete report, authored by John Matheson and George McGunnigle, can be accessed here. The committee said it “has not found support for and rejects the core proposition of the demand letters and derivative complaints—that Medtronic, with the knowledge and complicity of the defendants, designed and executed a scheme to evade the FDA’s prohibition against off-label promotion in order to increase the sales of Infuse.”

The committee gave its report to Medtronic’s board on May 30, concluding that the allegations against Medtronic’s leaders are “without merit,” and, as the company faces ongoing federal securities fraud and personal injury litigation involving similar accusations, “it would not be in the best interests of the company to pursue such claims.” On June 4, the committee filed a motion to have its findings approved in court, and for consolidated shareholder lawsuits pending in Hennepin County Court to be dismissed “with prejudice.” A hearing on the matter is scheduled for July 2, Medtronic said.

The committee also plans to file another motion later this week, seeking dismissal of a similar lawsuit pending in Minnesota’s U.S. District Court, Medtronic said.

Medtronic has already paid millions of dollars to settle Infuse-related lawsuits. And health insurance company Humana recently sued Medtronic over the Infuse product, according to media reports.

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