Medtronic 2011 Annual Report Download - page 98

94 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
In addition, class action product liability suits pending in
Canada are consolidated in the Ontario Superior Court of Justice.
That court certified a class of individual implant recipients and
their family members for proceeding on December 6, 2007.
Additionally, the subrogated claims of the provincial health
insurers to recover costs incurred in providing medical services to
the implant class are claimed in the class proceeding. Pretrial
proceedings are underway. The Company has not recorded an
expense related to damages for the remaining suits because any
potential loss is not currently probable or reasonably estimable
under U.S. GAAP, and based on current information, the Company
does not believe that these suits are likely to have a material
adverse effect on the Company’s operations.
Sprint Fidelis Product Liability Matters
On October 15, 2007, the Company voluntarily suspended
worldwide distribution of its Sprint Fidelis (Fidelis) family of
defibrillation leads. As of April 29, 2011, approximately 4,000
lawsuits regarding the Fidelis leads had been filed against the
Company, including approximately 47 putative class action suits,
reflecting a total of approximately 9,000 individual personal injury
cases. Approximately 2,800 of the lawsuits were commenced in
Minnesota state court and approximately 1,200 were 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
dismissed with prejudice the master consolidated complaint for
individuals and the master consolidated complaint for third-party
payors on grounds of federal preemption. The state court judge
dismissed the state court cases on similar grounds on October 22,
2009. Plaintiffs sought appeals in both the federal and state court
matters. The Minnesota Court of Appeals dismissed the appeal on
May 16, 2011. On October 15, 2010, the U.S. Court of Appeals for
the Eighth Circuit affirmed the dismissal of plaintiffs’ claims. On
October 29, 2010, plaintiffs petitioned the Eighth Circuit for
rehearing of their appeal. On June 14, 2011, the Eighth Circuit
dismissed this petition for rehearing.
The Company announced on October 14, 2010 it had entered
into an agreement to settle the pending lawsuits as well as certain
unfiled claims subject to opt-out rights by both plaintiffs and the
Company, including the Company’s right to cancel the agreement.
The terms of the agreement stipulated that, if Medtronic elected
not to cancel the agreement, it would pay plaintiffs to settle
substantially all pending U.S. lawsuits and claims, subject to
certain conditions. The parties subsequently reached an adjusted
settlement agreement pursuant to which Medtronic waived its
right to cancel the agreement and agreed to pay a total of $221
million to resolve over 14,000 filed and unfiled claims. In the
second quarter of fiscal year 2011, the Company recorded an
expense of $268 million related to probable and reasonably
estimated damages under U.S. GAAP in connection with these
matters, and, consistent with the adjusted settlement agreement,
the Company reduced that expense to $221 million in the fourth
quarter of fiscal year 2011.
In addition, one putative class action has been filed in the
Ontario Superior Court of Justice in Canada. On October 20,
2009, that court certified a class proceeding, but denied class
certification on plaintiffs’ claim for punitive damages, which the
plaintiffs appealed. On July 16, 2010, the appeal was denied.
Plaintiffs’ request for further appeal was denied on November 22,
2010. The Company has not recorded an expense related to
damages in connection with that matter because any potential
loss is not currently probable or reasonably estimable under
U.S. GAAP.
Shareholder Related Matters
On December 10, 2008, the Minneapolis Firefighters’ Relief
Association filed a putative class action complaint against the
Company and certain current and former officers in the U.S.
District Court for the District of Minnesota, alleging violations of
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The
complaint alleges that the defendants made false and misleading
public statements concerning the INFUSE Bone Graft product
which artificially inflated Medtronic’s stock price during the
period. On August 21, 2009, plaintiffs filed a consolidated putative
class action complaint expanding the class. Medtronic’s motion to
dismiss the consolidated complaint was denied on February 3,
2010, and pretrial proceedings are underway.
The Company has not recorded an expense related to damages
in connection with this matter because any potential loss is not
currently probable or reasonably estimable under U.S. GAAP.
Mirowski
Medtronic is a licensee to the RE 38,119 patent (‘119 Patent) and
RE 38,897 patent (‘897 Patent) owned by Mirowski Family Ventures,
LLC (Mirowski) relating to the treatment of hemodynamic
dysfunction. Medtronic and Mirowski dispute the application
of the ‘119 and ‘897 Patents to certain Medtronic cardiac
resynchronization products. On December 17, 2007, Medtronic
filed an action in U.S. District Court for the District of Delaware
seeking a declaration that none of its products infringe any valid
claims of either the ‘119 or ‘897 Patents. If certain conditions are