Boston Scientific Wins Dismissal of Suit Over Sales Group

Boston Scientific Corp. won dismissal of a class-action lawsuit accusing the company of failing to disclose questionable sales practices in its cardiac- devices group to investors.

Four pension funds sued last year, claiming losses of more than $2.8 million from buying the stock at an artificially inflated price. U.S. District Judge Douglas Woodlock in Boston ruled yesterday that the complaint failed to state a “cognizable” claim for securities fraud.

“Rather than suggesting an intent to deceive investors, the facts contained in the complaint exhibit the defendants engaging in a good faith process to inform themselves and the public of the risks,” Woodlock said in a 41-page opinion.

Boston Scientific failed to promptly disclose its decision to fire some sales representatives after an internal audit uncovered ethical violations in dealings with physicians, according to the complaint, filed on behalf of investors who bought the stock from Oct. 20, 2009, to Feb. 10, 2010.

The company, based in Natick, Massachusetts, disclosed the terminations in February 2010 after many of the sales personnel were hired by competitor St. Jude Medical Inc., court papers showed. Boston Scientific reported in April 2010 that the disciplinary actions would result in about $300 million in losses.

‘Reasonable Time’

The company made the disclosures in a “reasonable time,” Woodlock said in his ruling.

Boston Scientific’s cardiac rhythm management sales group is responsible for devices such as pacemakers and implantable defibrillators.

Jonathan Shapiro, an attorney for one of the plaintiffs, Steelworkers Pension Trust, didn’t immediately return a phone call seeking comment on the ruling.

Boston Scientific rose 2 cents to $6.33 at 1:21 p.m. in New York Stock Exchange composite trading.

The case is In re Boston Scientific Corp. (BSX) Securities Litigation, 10-10593, U.S. District Court, District of Massachusetts (Boston).

To contact the reporter on this story: Sophia Pearson in Wilmington at spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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