Covidien (NYSE:COV) subsidiary Ev3 logged a pair of legal wins in recent weeks when the Delaware Supreme Court overturned a $250 million loss to Ev3 acquisition Appriva Medical and a federal judge in Massachusetts tossed a whistleblower’s lawsuit.
The Delaware Superior Court ruled in 2013 that ev3 broke its contract with Appriva Medical when it denied the $175 million milestone for Appriva’s Plaato device, which it acquired in August 2002 for a $50 million cash payment plus milestones.
Covidien in March asked the First State’s Supremes to grant a new trial over the $175 million in milestones Appriva Medical alleges are owed from a 2002 acquisition. The high court reversed the superior court’s ruling Sept. 30, finding that the lower court erred in erred in allowing the jury to interpret a portion of the ev3/Appriva deal and in interpreting the merger agreement to be subject to a previous, non-binding letter of intent.
"We conclude that the Superior Court erred by accepting Appriva’s position that the non-binding funding provision within the letter of intent was admissible to affect the meaning of [the merger agreement]. By its clear terms, [the merger agreement] overrode any ‘provision to the contrary.’ Even more specifically, it made clear that the sole discretion given to the buyer extended to the obligation to ‘provide funding for the surviving corporation, including without limitation funding to pursue achievement of any of the milestones.’ These clear terms negated Appriva’s contention that the funding provision in the letter of intent was binding and that it tempered Ev3’s obligation to act in good faith," according to court documents. "Because the funding provision was inconsistent with [the merger agreement], it was error for the Superior Court to allow Appriva to argue that the funding provision was binding as a promise and that the sole discretion standard in [the merger agreement] was subject to compliance with or tempered buy the funding provision. Relatedly, it was also error to allow Appriva to use the funding provision as evidence of a binding promise, but to deny ev3 the opportunity to refute this argument with the broader negotiating history."
Ev3 scored another courtroom victory Sept. 30 when Judge Richard Stearns of the U.S. District Court for Massachusetts dismissed whistleblower Jeffrey D’Agostino’s qui tam lawsuit. D’Agostino alleged that ev3 broke the False Claims Act by promoting its Onyx hydrogel blood blocker and Axium embolization coil for off-label uses.
Stearns ruled that D’Agostino, a former ev3 sales rep, failed to produce sufficient evidence to prove his allegations.
"While the [complaint] specifies 2 adverse incidents attributed to Onyx, any identification of the surgeons or facility involved is missing, any description of a monetary loss to the government is omitted, and there is no allegation that a claim for payment (false or otherwise) was presented to any government payer as a result of either of the alleged incidents," Stearns wrote. "The conclusory allegation that ‘hundreds’ of similar incidents must have occurred and that some of these must have cost the government money is illustrative of the kind of opportunistic pleading that [Massachusetts law] is designed to prevent. Moreover, D’Agostino’s theory that ‘every claim paid by the government which involved the use of Onyx violated the FCA’ fits precisely in the legal-argument-disguised-as-fact category that the 1st Circuit flatly rejected."
