Judge Scales Back J&J Suit Over Guidant Deal

A U.S. court dealt a blow to Johnson & Johnson in its $5.5 billion lawsuit over the sale of Guidant Corp to Boston Scientific Corp, dismissing some claims and only allowing part of the case to proceed. The ruling, which was made public on Thursday, throws out the case against Abbott Laboratories Inc but allows J&J to go ahead with its claim against Guidant for breach of contract. J&J last year lost its battle to acquire Guidant, a medical device maker, to Boston Scientific. It sued Guidant, Boston Scientific and Abbott, which played a secondary role in the deal, in September. “This case arises from a proposed merger that left plaintiff Johnson & Johnson with a broken heart,” U.S. District Judge Gerard Lynch in Manhattan wrote in a 43-page ruling, dated Wednesday. Lynch granted a motion by Abbott to dismiss it from the lawsuit. He also granted dismissal of a claim against Boston Scientific for interference with contract and a claim against Guidant for breach of an implied duty of good faith and fair dealing. But he denied requests from Boston Scientific and Guidant for dismissal of J&J’s claim against Guidant for breach of contract. The judge said he let that claim stand because a merger agreement between J&J and Guidant “makes clear that Guidant was not allowed to solicit bids.” “The complaint alleges that Guidant provided the due diligence without any inquiry from Abbott that permitted it to do so,” Lynch wrote. “At this point it cannot be said as a matter of law that this is not what happened.” J&J alleged that Guidant gave confidential information to Abbott, and that this ultimately led to Boston Scientific winning the battle to acquire Guidant for $27 billion. Abbott bought Guidant’s vascular business, including heart devices called stents that are used to prop open arteries that have been cleared of plaque. Stents are Boston Scientific’s main business, and there had been concerns that its acquisition of Guidant’s stents would raise antitrust concerns that could endanger Boston Scientific’s plan to buy Guidant. Guidant had originally agreed to be acquired by J&J, a diversified health-care company. It paid J&J a $705 million termination fee to walk away from the deal. But J&J claimed it was entitled to further damages. “We’re pleased that the majority of the claims were dismissed,” a Boston Scientific spokesman said, adding the company continues to believe the remaining claim is without merit. J&J also took an upbeat stance. Spokesman Marc Monseau said J&J was gratified “the court upheld the breach of contract clause,” and that his company would continue to pursue its case. Safety concerns involving both stents and other heart devices sold by Boston Scientific as well as massive debt from the Guidant deal, have prompted a major fall in Boston Scientific’s share price. Consequently, some analysts have suggested J&J dodged a bullet by failing to acquire Guidant. J&J shares were down 15 cents to $61.72, Boston Scientific stock was off 18 cents at $12.67, and Abbott fell 3 cents at $51.46, all in afternoon trading on the New York Stock Exchange.