Sunday, August 23, 2009

Judge Dismisses Biovail lawsuit

This week a judge in a state court in New Jersey has dismissed a suit against the hedge fund SAC, the investment vehicle of Steven A. Cohen. This is the lawsuit brought by the Canadian pharmaceutical company Biovail, the lawsuit that attained especial prominence because it was the object of a "60 Minuites" profile in March 2006.

The opinion dismissing the case is available through Scribd.

Initiated on February 22, 2006, and first couched in terms of the New Jersey Racketeering Influenced and Corrupt Organizations Act. The case had been removed the federal court immediately upon filing, but then remanded to state court.

But it was tainted, in the opinion of the court, because the documents from Bank of America Securities pursuant to a protective order back in 2005 were then wrongly used to draft the complaint in the state case.

Apparently pursuant to a desire to remove that taint and under the sway of new counsel, Biovail reframed the complaint in trade libel, and took the position that the New Jersey court should apply Ontario's law. New Jersey has a "substantial relationship" test on choice of law. Specifically, in a tort action the law of the place of injury should govern unless another forum has a more significant relationship to the place or parties.

Most of the defendants are situated in New York, and the stock is traded in New York on the NYSE, so thatis the law he applies. And New York has strict requirements for the pleading of "special damages" in trade libel.

Bottom line, "Biovail's complaint fails in that the statements alleged are not the type that are considered within the gamut of trade libel, but rather defamation, a claim for which the statute of limitations has long since run." The opinion gives the impression that Biovail lost interest in the matter after its own recent executive upheavals, which I have chronicled in other posts here.

No comments: