Johnson & Johnson (NYSE:JNJ) subsidiary Conor MedSystems can’t slip a $100 million breach of contract lawsuit filed by former European distribution partner Biotronik, a New York state appeals court ruled last week.
Biotronik accused Conor of issuing a sham recall of its drug-eluting CoStar coronary stent and spiking a distribution deal that cost Biotronik $100 million, alleging that Conor reneged on a supply contract for its CoStar stent, which Conor recalled in 2007 after it fared badly in a clinical comparison with Boston Scientific‘s (NYSE:BSX) Taxus drug-eluting stent. But the recall was a sham aimed at eliminating a competitor to J&J’s Cordis Cypher stent in Europe, Biotronik alleged.
In March, another Empire State appeals court ruled that Biotronik’s lost profits "were the direct and probable result of a breach of the parties’ agreement and thus constitute general damages," according to court documents. Last week the appellate division of the New York Supreme Court shot down Conor MedSystem’s bid for summary judgment, ordering a new trial to determine its liability for Biotronik’s lost profits.
"The record raises an issue of fact as to what motivated the recall and whether defendants fulfilled their obligations under section 7, which refers to the stents’ discontinued production for any reason," according to court documents.
Johnson & Johnson bought Conor just before the CoStar recall, but had abandoned the coronary stent market entirely by the end of 2011.