Originally published in Law360, New York on August 06, 2012.
In re Boston Scientific Corp. Securities Litigation (1st Cir. July 12, 2012), the United States Court of Appeals for the First Circuit affirmed the dismissal of a securities class action lawsuit against Boston Scientific Corporation (the “BSC”). The court held that the alleged misstatements or omissions were not sufficiently material to support a claim under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and that the complaint’s allegations failed to meet the heightened requirements for pleading scienter under the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4. In so holding, the First Circuit reconfirmed that the federal securities laws do not impose an affirmative duty on management to disclose all information that might affect the price of a company’s stock.
BSC manufactures and distributes medical devices. In August 2009, it was alerted to possible compliance violations by its Cardiac Rhythm Management (“CRM”) sales team. BSC initiated an internal investigation and decided to terminate 10 CRM sales persons for violations of the company’s code of ethics. This investigation coincided with a subpoena from the U.S. Department of Health and Human Services, received in September 2009, requesting information regarding certain donations to charities made by the CRM group.
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