Legal Briefing: Boston Scientific Pleads Guilty to Criminal Charges

A daily look at legal news and the business of law:

Boston Scientific Withheld Reports Its Implanted Defibrillators Failed

People with abnormal heart rhythms -- a condition that can quickly spiral into a fatal heart attack -- often get defibrillators implanted so that a corrective shock can be delivered whenever needed. Or rather, that's what defibrillators are supposed to do when they actually work.

Boston Scientific's (BSX) Guidant unit knew in 2002 that its defibrillators were shorting out and, according to prosecutors, people died as a result. However, Boston Scientific didn't tell regulators or initiate a recall until 2005. (Imagine that recall letter: Hi, Sorry to trouble you, but that major heart surgery you underwent? We're not sure the device implanted works. So please go see your surgeon again and consider having him or her swap it out. We're positive the new one will work correctly.)

Boston Scientific changed its manufacturing process to fix two of the three problematic models, but didn't tell the FDA about the process change. As a result, the changes were illegal, so just a few weeks ago Boston Scientific stopped selling the corrected models and recalled ones already distributed, a move estimated to cost the company some $470 million in lost sales over the next two years. Interestingly, when the FDA announced the recall, it did not advise removing the already implanted devices, presumably because the risk of any one device shorting out is small, but the risks of surgical removal are significant. Nonetheless, I can't imagine many of the patients are willing to keep the possibly faulty devices implanted given the potentially deadly consequences of a failure.

On Monday, Boston Scientific tried to plead guilty to two misdemeanors: one count of making a false statement to the Food and Drug Administration, and another of failing to report to the FDA that it had made a "correction" to the other two models. The judge, however, isn't quite ready to accept the plea. Apparently, plaintiffs in litigation against Boston Scientific are outraged about it, and the judge wants to give it more thought. Normally, it would be bizarre for plaintiffs in civil suits to be angry their defendant is pleading guilty to related charges, but this isn't a normal case.

The plaintiffs seem to consider these charges related to the "cover up," rather than the far more serious underlying "crime." The plaintiffs' attorney Charles Zimmerman said, according to Bloomberg, "When a corporation who makes life-saving devices lies to the FDA, that puts the implantees and others at risk... Guidant comes before the court and asks you to accept a plea of guilty in which they admit they have lied." Perhaps the plaintiffs are hoping for a charge like negligent homicide.

Lockheed Martin's "Mistake" Cost It $53 Million

In May 2009, Lockheed Martin Corp.(LMT) won a $37 million judgment plus $16 million in attorneys fees by suing L-3 Communications Integrated Systems for misappropriating trade secrets associated with Lockheed's anti-submarine bomber. Now Judge Parnell has thrown out the verdict and fee award, and Lockheed will have to bring a new suit to get anything.

Lockheed, apparently knowingly, allowed another competitor to use the trade secrets without a license before L-3 did. If true, that would destroy the trade secret status and L-3 would be completely off the hook. L-3 almost missed learning of the other competitor's use of the "secrets," as Lockheed didn't turn over emails containing that information during the normal discovery process. Oddly, Lockheed did turn over other emails, however, including ones from the same email "tree," making the key emails' exclusion appear deliberate. Many of the documents in the case are under seal for now, so all the details aren't out yet. However, the judge is considering a media request to release the filings.

NFL Facing Workers Comp Test Case Over Players' Dementia

Recently, much has been made of the seemingly obvious: Smacking your head, hard, repeatedly, for years, even while wearing a helmet, is really bad for your brain. Studies are starting to show that football players are far more likely than most people to show signs of brain damage and to develop trauma-driven dementia. So is dementia a work related injury that the NFL is liable for under workers' compensation law? The New York Times discusses a case that will answer that question. (An interesting side note is that all NFL workers comp claims are filed in California because of unusually generous law there, so much so that a new arena football league is staying out of California to avoid potential liability.)

And in the Business of Law...

The Maryland Legislature may be backing off its threat to de-fund the University of Maryland's environmental law clinic.

Quarles & Brady is doing well enough to expand in Florida and Chicago.

Many law firms agree that when it comes to revenues and profits, "flat is the new up."

The Securities and Exchange Commission's revolving door -- staff attorneys going to law firms to lobby on behalf of the firms they once oversaw for the SEC -- spins remarkably fast.

The National Law Journal just released its annual report on lobbying; headlines are available to all but only a few details are available without a subscription.