Medtronic 2009 Annual Report Download - page 98

94 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
subsequently classified the Company’s action as a Class I recall.
As of June 15, 2009, approximately 1,250 lawsuits regarding the
Fidelis leads have been filed against the Company, including
approximately 37 putative class action suits reflecting a total of
approximately 2,300 individual personal injury cases. In general,
the suits allege claims of product liability, warranty, negligence,
unjust enrichment, emotional distress and consumer protection
violations. One lawsuit includes a claim by an individual purporting
to act as a surrogate for the Center for Medicare and Medicaid
Services, and one lawsuit has been brought by a third party payor
as a putative class action suit. In addition, one putative class
action has been filed in the Ontario Superior Court of Justice in
Canada. Approximately 400 of the lawsuits have been filed in
state court, generally alleging similar causes of action. Of those
state court actions, approximately 380 are consolidated before a
single judge in Hennepin County District Court in the state of
Minnesota. That judge has scheduled a hearing on Medtronic’s
motion to dismiss the Minnesota cases for September 4, 2009,
and discovery continues to be stayed. The federal court cases
have been consolidated for pretrial proceedings before a single
federal judge in the U.S. District Court for the District of Minnesota
pursuant to the Multi-District Litigation (MDL) rules. On January 5,
2009, the MDL court entered an order dismissing with prejudice
the master consolidated complaint for individuals and the master
consolidated complaint for third party payors on grounds of
federal preemption. On May 12, 2009, the MDL court denied
plaintiffs’ request to file a motion for reconsideration of the
dismissals and plaintiffs’ motion seeking permission to amend the
master consolidated complaint. The court dismissed with prejudice
229 cases that adopted the master consolidated complaint and
stayed all other cases pending further order of the court. Plaintiffs
in the 229 cases filed a notice of appeal to the Eighth Circuit Court
of Appeals on May 29, 2009. Oral argument in the Court of Appeals
is anticipated in December 2009. Discovery in the Minnesota state
court continues to be stayed.
The Company has not recorded an expense related to damages
in connection with the matter because any potential loss is not
currently probable or reasonably estimable under SFAS No. 5.
Shareholder Related Matters
On November 8, 2007, Stanley Kurzweil filed a putative class
action complaint against the Company and certain of its officers
in the U.S. District Court for the District of Minnesota, alleging
violations of Section 10(b) of the Securities Exchange Act of 1934
(the Exchange Act) and Rule 10b-5 thereunder. The complaint is
brought on behalf of persons or entities who purchased securities
of Medtronic during the period of June 25, 2007 through October
15, 2007. The complaint alleges that “materially false and
misleading” representations were made as to the market
acceptance and use of the Fidelis defibrillator leads to artificially
inflate Medtronic’s stock price. Pursuant to court order, the caption
of the case was changed to Medtronic, Inc., Securities Litigation,
and a consolidated putative class action complaint was filed on
April 18, 2008. On March 10, 2009, the court entered an order
dismissing the complaint with prejudice and denying plaintiffs
leave to amend. Plaintiffs have filed a motion to alter the
judgment, which was denied on May 29, 2009.
On November 29 and December 14, 2007 respectively, Feivel
Gottlieb and Alan Weinberg filed shareholder derivative actions in
Hennepin County District Court in the state of Minnesota against
both the Company and certain of its officers and directors,
alleging breach of fiduciary duty, waste of corporate assets and
other claims arising from the same subject matter as the
consolidated class action complaint. On July 28, 2008, the state
court stayed these actions pending final resolution of the related
consolidated class action complaint.
Similarly, on January 9, 2008, Iris Markewich filed a shareholder
derivative action against both the Company and certain of its
officers, directors, and employees (the defendants) in the U.S.
District Court for the District of Minnesota, alleging breach of
fiduciary duty, waste of corporate assets and other claims arising
from the same subject matter as the consolidated class action
complaint. After the defendants moved to dismiss the complaint,
the plaintiffs amended their complaint to add similar allegations
relating to alleged off-label promotion of INFUSE Bone Graft. On
May 11, 2009, the court granted the defendants motion to dismiss
without prejudice.