Merck & Co. doesn’t have to pay a $32 million jury award to the family of former user of the company’s Vioxx painkiller who died of a heart attack, the Texas Supreme Court ruled.
The court said on Aug. 26 that the family of Leonel Garza didn’t produce adequate evidence showing Vioxx caused the heart attack. Merck, the second biggest U.S. drugmaker, agreed in 2007 to pay $4.85 billion to settle thousands of injury claims over the drug.
Lawyers for the Garzas “did not present reliable evidence of general causation and therefore are not entitled to recover against Merck,” the state’s highest court concluded in an 18-page decision.
Kathy Snapka, one of the Garza family’s lawyers, didn’t immediately return a phone call or e-mail seeking comment on the Supreme Court ruling.
Officials of Whitehouse Station, New Jersey-based Merck pulled Vioxx off the market in 2004 after researchers linked it to an increased risk of heart attack and stroke. Former users also criticized the company for downplaying the drug’s health risks and manipulating studies to help promote the drug.
Merck officials countered that Vioxx wasn’t the cause of users’ heart attacks and that the company had properly warned doctors and consumers about the painkiller’s risks.
Merck won 11 of the 16 cases over Vioxx that went to trial starting in 2005. Under the November 2007 settlement, Merck excluded some of the cases it lost, including Garza’s, from being included under the accord.
A jury in Rio Grande City, Texas, ruled in April 2006 that Merck failed to warn doctors of Vioxx’s risks and that the drug caused the fatal heart attack of Garza, 71, in 2001. The jury awarded $32 million to Garza’s widow, which Judge Alex Gabert cut to $8.73 million because of a state cap on punitive damages.
“Today’s decision reaffirms that there is simply no reliable scientific evidence that Vioxx caused” Garza’s heart attack, Ted Mayer, a lawyer for Merck, said in an e-mailed statement.
The case is Garza v. Merck & Co., 03-84, 229th Judicial District Court, Starr County, Texas (Rio Grande City).
Star Scientific Loses New Trial Bid in Reynolds Tobacco Case
Star Scientific Inc. tumbled the most in two years after losing a bid for a new trial in its decade-long effort to extract patent royalties from Reynolds American Inc. on a way to reduce carcinogens in cigarettes.
While the U.S. Court of Appeals for the Federal Circuit in Washington on Friday upheld the validity of two Star patents, the panel said there was no need to retry the infringement case that Star lost in 2009. Chief Circuit Judge Randall Rader said in the 2-1 opinion that a new trial wouldn’t change the outcome as “there was substantial untainted evidence before the jury to support a verdict of non-infringement.”
The patents cover a curing process that prevents “bacterial activity” in tobacco leaves, resulting in the lowest levels of cancer causing nitrosamines, according to Star. The money-losing company, which had less than $1 million in sales last year, has “not been able to monetize their only asset,” Martin Shkreli, chief investment officer of New York-based hedge fund MSMB Capital Management, said after the ruling.
The Glen Allen, Virginia-based company said it’s considering options for “further appellate review.” Star said the validity ruling will allow it to pursue claims “against all prior and future infringers,” including another case it has against Reynolds that had been put on hold pending this appeal.
“We intend to vigorously protect our intellectual property, which we consider to be among our corporate crown jewels,” Star Chairman and President Paul L. Perito said in a statement on Friday.
Star had claimed Reynolds was unable on its own to reduce nitrosamines in tobacco as much as Star could. Star said Reynolds then chose to use the technology without permission as part of an effort to “neutralize” competition. Reynolds denied the claim, challenging validity of the patents.
August Borschke, chief patent counsel for R.J. Reynolds Tobacco, said in an e-mail, “R.J. Reynolds did not infringe Star’s patents.”
The case is Star Scientific v. R.J. Reynolds Tobacco Co., 10-1183, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 01cv1504, U.S. District Court, District of Maryland (Greenbelt).
Court Affirms Dismissal of Interpharm’s Wells Fargo Lawsuit
A federal appeals court in New York affirmed the dismissal of a lawsuit against Wells Fargo & Co. by the former generic-drug maker Interpharm Inc. over claims the bank used restrictive credit agreements and exorbitant fees to force the company into an unprofitable sale.
Interpharm, which sold most of its assets in June 2008, sued Wells Fargo in December 2008, saying it lost about $40 million of value when the San Francisco-based company reduced its credit limit based on allegedly erroneous income projections.
The U.S. 2nd Circuit Court of Appeals in an opinion dated Aug. 26 affirmed U.S. District Judge Richard J. Holwell’s decision to dismiss the case in May, saying that Wells Fargo wasn’t obligated to extend any further credit to Interpharm after the drugmaker defaulted on a credit agreement.
“To the extent it agreed to do so in a series of forbearance agreements imposing stricter conditions and costs on Interpharm, these demands by a lender otherwise under no obligation to continue extending credit cannot constitute the ‘wrongful threat’ required to establish economic duress under New York law,” Circuit Judge Reena Raggi said in the opinion. “Nor can a wrongful threat be based on Wells Fargo’s exercise of discretion specifically conferred by the Credit Agreement.”
The case is Interpharm Inc. v. Wells Fargo Bank NA, 08-cv-11365, U.S. District Court, Southern District of New York (Manhattan). The appeal is Interpharm Inc. v. Wells Fargo Bank NA, 10-1801-cv, 2nd U.S. Circuit Court of Appeals (New York).
Morgan Stanley Must Face Claims Over Mortgages, Court Says
Morgan Stanley must face a mortgage-servicing company’s claims that it violated an agreement to repurchase faulty home loans, a court ruled.
Central Mortgage Co. can move forward with a lawsuit accusing New York-based Morgan Stanley of reneging on a contract requiring the securities firm to repurchase mortgages that hadn’t been properly screened before being sold to Fannie Mae and Freddie Mac, the Delaware Supreme Court concluded. The ruling reversed a lower-court judge’s decision to throw out the suit.
Central Mortgage’s allegations that a Morgan Stanley unit didn’t live up to its agreement satisfied “the minimal standards required at this early stage of the litigation,” Chief Justice Myron Steele said Aug. 18 in a 21-page decision.
The decision is part of a round of litigation among lenders, mortgage servicers and investors over the handling of flawed home loans that have contributed to the decline in the U.S. real estate market over the past three years.
Bank of America Corp., the biggest U.S. bank, has offered to pay $8.5 billion to settle bondholders’ claims over soured mortgages overseen by the lender. Some state attorneys general have objected to the accord, saying it doesn’t provide enough for investors.
Sandra Hernandez, a Morgan Stanley spokeswoman, couldn’t immediately comment on the court decision on Friday.
The case is Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 595-2010, Delaware Supreme Court (Dover).
For more, click here.
Cordish Allowed to Press Suit Against Indianapolis Downs CEO
Cordish Co., a real-estate developer building a casino near Baltimore, can pursue a defamation lawsuit against the chief executive officer of its bankrupt former business partner, Indianapolis Downs LLC, a judge said.
U.S. Bankruptcy Judge Brendan Linehan Shannon, in Wilmington, Delaware, ruled on Aug. 26 that CEO Ross J. Mangano can’t delay a lawsuit against him in Maryland in order to concentrate on reorganizing Indianapolis Downs. The lawsuit, which had temporarily been on hold, can proceed 30 days from now, Shannon said.
“Involving him in this litigation is not going to affect the debtor’s ability” to reorganize, Cordish attorney Kenneth Oestreicher said in court Friday.
After Indianapolis Downs, based in Shelbyville Indiana, filed for bankruptcy in April, Shannon temporarily halted the Cordish litigation against Mangano. That protection is no longer necessary, Shannon said Friday.
Cordish sued in February, claiming it was defamed by competing casino companies and their executives, including Mangano and horse-track owner Frank Stronach.
Mangano and Stronach allegedly were “part of an ongoing campaign designed to smear, defame and otherwise falsely portray the Cordish Entities for the purpose of harming them economically and influencing both the Maryland State legislature and lottery commission.”
Indianapolis Downs denied Cordish’s allegations in court papers. In a statement in February, Stronach’s company, MI Developments Inc., called the suit meritless.
The temporary restraining order case is Indianapolis Downs LLC v. Power Plant Entertainment Casino Resorts, Indiana, LLC 11-51996. The bankruptcy case is In re: Indianapolis Downs LLC. 11-11046. Both are in U.S. Bankruptcy Court, District of Delaware (Wilmington).
Ex-Marvell Technology Accountant Ng Released on $50,000 Bond
Former Marvell Technology Group Ltd. accountant Stanley Ng, charged in a nationwide crackdown on insider trading, made an initial court appearance in New York on Aug. 26 and was released on a $50,000 bond.
Ng, 42, didn’t enter a plea Friday at his first federal court appearance in Manhattan. U.S. Magistrate Judge James Francis agreed to release Ng on a bond secured by one financially responsible person and his California home and ordered him to surrender his passport. Both Ng and his lawyer, Silvia Serpe, declined to comment after court.
He was arrested Aug. 10 for allegedly leaking material non-public information to Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC. He’s charged with one count of conspiracy to commit securities and wire fraud and faces as long as five years in prison if convicted.
Jiau, 43, was convicted in June of one count each of conspiracy and securities fraud after being caught in Manhattan U.S. Attorney Preet Bharara’s probe of insider trading involving so-called expert networking firms and hedge-fund managers.
The case is U.S. v. Ng, 11-02096, U.S. District Court, Southern District of New York (Manhattan).
Fannie Mae Investors Sue Conservator Over Limits on Recovery
Fannie Mae’s conservator was sued by a group of pension fund investors over a rule that could limit their recovery for damages stemming from securities fraud.
The Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio asked a federal judge in Washington Aug. 26 to throw out the Federal Housing Finance Agency rule, which sets the priority for payment of unsecured claims against Fannie Mae and Freddie Mac, the home mortgage finance companies now under government control.
The pension funds argue that the rule, which took effect July 20, violates the Appointments Clause of the U.S. Constitution and the Housing and Economic Recovery Act because Edward DeMarco, FHFA’s acting director, who imposed it, has been in his position for almost two years without Senate confirmation.
The pension funds are the lead plaintiffs in a lawsuit filed in 2004 related to a $6.3 billion overstatement of earnings. The defendants include Fannie Mae, its former chairman, two other former executives and KPMG, a former company auditor.
Stefanie Johnson, an FHFA spokeswoman, wouldn’t comment on the filing.
In the rule, FHFA subordinated certain claims, including damages arising from shareholder lawsuits. Richard Cordray, then Ohio’s attorney general, raised objections to that design when it was under consideration last year.
When it issued its final rule in June, the FHFA called shareholder plaintiff concerns “unfounded.”
The case is Ohio Public Employees Retirement System v. Federal Housing Finance Agency, 11-cv-01543, U.S. District Court, District of Columbia (Washington).
For more, click here.
Investors Seek to Move Venue of BofA Mortgage-Bond Accord
An investor group challenging Bank of America Corp.’s proposed $8.5 billion mortgage-bond settlement is seeking to move the case to federal court from state court.
Walnut Place LLC and related entities that would be bound by the proposed deal filed a notice of removal of the case to U.S. District Court in Manhattan. The case was first filed in state court, where a judge is scheduled to consider approving the agreement in November.
A change in venue that extends how long the case takes may mean a longer period of concern among Bank of America shareholders about whether the settlement’s costs will increase. It may also give bondholders seeking a large payout more time to organize their efforts and strengthen their objections, according to Bill Frey, head of investment and brokerage firm Greenwich Financial Services LLC in Greenwich, Connecticut, who advises mortgage-securities investors.
Under the proposed settlement, Bank of America would pay $8.5 billion to resolve claims from investors in Countrywide Financial mortgage bonds. It was negotiated with a group of institutional investors and would apply to investors outside that group.
Bank of New York Mellon Corp., the trustee for the mortgage-securitization trusts covered by the settlement, will seek to move the case back to state court, Kevin Heine, a bank spokesman said.
“This tactical maneuvering at the deadline for objections has no impact on the underlying merits of the agreement,” Bank of America spokesman Lawrence Grayson said in an e-mailed statement.
David Grais, a lawyer for Walnut Place, couldn’t immediately be reached for comment.
The case is In the matter of the application of The Bank of New York Mellon, 651786/2011, New York state Supreme Court, New York County (Manhattan).
Allstate’s Suit Against Goldman Most Popular Docket on Bloomberg
A lawsuit accusing Goldman Sachs Group Inc. of fraudulently selling more than $100 million in mortgage-backed securities to Allstate Insurance Co. was the most-read litigation docket on the Bloomberg Law system last week.
Allstate asked for damages including the lost market value of the securities, plus principal and interest payments in the complaint filed Aug. 15 in New York state Supreme Court in Manhattan.
The insurer, based in Northbrook, Illinois, has filed similar suits against JPMorgan Chase & Co. over $700 million of mortgage-backed securities the bank sold the insurer; Credit Suisse Group AG units for more than $231 million of the securities; Bank of America Corp.’s Merrill Lynch unit over some $167 million; Citigroup Inc., over more than $200 million and Deutsche Bank AG, over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios.
Goldman knew these types of securities were “junk,” “dogs,” “crap” and “lemons,” according to the suit, which claims the words are Goldman’s own, recently revealed in governmental investigations, to describe them.
Michael Duvally, a spokesman for Goldman, declined comment on the suit.
The case is Allstate Insurance Co. v. Goldman Sachs & Co., 652273/2011, New York state Supreme Court (Manhattan).