Judge James Rosenbaum didn’t mince a single word in his stinging rejection of a Medtronic Inc. (NYSE:MDT) motion to dismiss a class-action lawsuit concerning defective pacemaker batteries.
In a scathing U.S. District Court for Minnesota decision denying the Minneapolis medical device leviathan’s move, Rosenbaum wrote that Medtronic’s core claim “denies reality” and called its arguments “sophistry.”
The case, The Kinetic Co. v. Medtronic Inc., involves Medtronic‘s January, 2003, discovery that batteries used in some of its pacemakers might lose their charge over the course of days or months, rather than years. Rather than disclose the possible defect and issue a recall, the company kept it secret even as it developed new batteries to correct the problem. Medtronic later said it learned of one serious injury and four deaths possibly related to the defective batteries, according to court documents.
Medtronic issued a recall affecting about 87,000 of its Micro Jewell II and Gem DR pacemakers in April, 2004, six months after learning of the potential problem. The recall was later expanded to include models in Medtronics’ Marquis and Maximo lines. Patients implanted with pacemakers containing the batteries had to have second operations to replace them; Medtronic provided free replacement devices but no reimbursement for the cost of the original device or the second surgery.
Enter Kinetic, an industrial knife maker based in Greendale, Wis., that had to pay for the replacement surgery for an employee covered by its health insurance policy. Kinetic sued to recover those costs from Medtronic, which countered with a motion claiming that third-party payors like Kinetic don’t have a legal claim to damages.
Rosenbaum ruled that the case can move forward on Kinetic’s assertions of false claims, deceptive trade practices, consumer fraud, breach of warranty and unjust enrichment.
In his decision, Rosenbaum wastes no time getting down to brass tacks, disputing the relevance of a previous case involving Guidant Corp. that found that third-party payors can’t seek reimbursement of medical expenses.
“This Court opts against Guidant’s holding, because this nation’s present healthcare regime almost always requires third party payors to shoulder a significant portion of the employees’ costs of medical services. To deny this fact, and to extract legal conclusions from the denial, denies reality, and real financial injuries occurring in the real world,” Rosenbaum wrote. “[Kinetic] ostensibly paid for a properly functioning defibrillator, with an expected life-cycle. It got, instead, a defibrillator with a potentially early-discharging battery, which might subject its employee to a catastrophic risk.”
Medtronic’s claim that third-party payors are barred from recovering the costs of the second surgeries also meets with heavy skepticism, if not downright scorn.
“Medtronic engages in a sophistry when it argues there is no relationship between itself and plaintiff. Without third-party payors, there would be no Medtronic, or any implantable defibrillators at all in the United States. Money from employers and insurers flows to Medtronic, creating the market for these devices and funding the medical research which develops them. When Medtronic provided a potentially dangerous device knowing it would put the patient at risk, it also knew where the replacement cost would fall — on third-party payors,” Rosenbaum wrote. “[W]hen Medtronic blithely asserts that the third-party payors — which ultimately reimbursed the physicians or hospitals which held the device in inventory — are barred from any recovery, it is wrong. It is wrong, because this cost is simply the last falling domino in a long line started by Medtronic.”