Medtronic loses bid to stop lawsuits
Judge rules enough evidence that company knew of faulty device, making settlements likelyNov 30, 2006 | MCCLATCHY NEWS SERVICE
Medtronic's failed attempt to dismiss more than 300 lawsuits over a recalled heart defibrillator could lead to out-of-court settlements, a legal expert said Wednesday.
Medtronic said it intends to appeal the Tuesday decision by U.S. District Court Judge James Rosenbaum but the firm language of the ruling may motivate the company to negotiate an end to the litigation, said a law professor.
"The plaintiff certainly has some ammunition to work with now," said David Prince of the William Mitchell College of Law. "Generally speaking, having to face the prospect of trying cases is a good thing for the plaintiff and a bad thing for the defendant."
Plaintiffs say Medtronic knew a battery in one model of its implantable cardio defibrillators was defective almost two years before it informed the Food and Drug Administration and alerted doctors about the potential for the device to lose its electrical charge prematurely.
Medtronic claimed the lawsuits are baseless, or pre-empted, because the device had passed a rigorous FDA approval process. Rosenbaum ruled that the pre-emption model did not apply in this case and that the cases could proceed. He referred to the defective ICD as a "medical Trojan horse" containing flawed components.
Lawyers for the ICD patients were buoyed by the ruling.
"This opens the courthouse doors to go forward and settle our claims," said Robert (Randy) Hopper, a plaintiff's attorney with the Minneapolis law firm Zimmerman Reed.
Wall Street, however, seemed to respond with a yawn Wednesday to news that Medtronic Inc. failed in its bid to dismiss the lawsuits.
Shares rose slightly in the morning and declined slightly in the afternoon the day after the Minneapolis federal court ruling.
The stock closed at $52.73, up 8 cents on the day.
Thomas Gunderson, an analyst for Piper Jaffray, said the ruling will have "little impact" on Medtronic.
"The overall number of lawsuits appears relatively small," Gunderson said. "There seems to be no serious consequences or deaths due to the recalled battery issue. Investors are not likely to attach importance to this decision."
David Heupel, portfolio manager for Thrivent Investment's Large Cap Growth Fund, said risk is inherent in the business of medical devices.
"That comes with the territory," Heupel said.
"These are complicated devices. There's no such thing as a perfect implantable defibrillator."
In his ruling, Rosenbaum said lawyers for the ICD recipients developed "credible evidence" that Medtronic continued to ship and sell devices with defective batteries after it discovered the defect.
Rosenbaum also wrote that it "defies logic" to contend that Congress meant to pre-empt device makers from lawsuits after they received FDA approval for a product.
"If the court adopted Medtronic's view, once a medical device manufacturer obtains (FDA) approval, it would be insulated from liability even if it chose to conceal data from the FDA," the opinion said.
Rosenbaum concluded that lawyers for the ICD patients have produced enough facts to demonstrate they have a case suitable for trial.
"From this evidence, a reasonable trier of fact could find Medtronic knew of this defect for a substantial period prior to advising the FDA of the defect," Rosenbaum wrote.