Skip to main content

A shareholder is demanding that the managers of Boston Scientific (NYSE:BSX) (BSX) - Get Boston Scientific Corporation Report personally pay any compensation and charges the medical device maker may incur in its legal scuffle with Jerusalem-based firm Medinol.

In this latest front in the Boston battle with its stent supplier, Medinol, Boston shareholder Alan Schuster is suing the company's management and directors, including co-founder Pete Nichols and CEO James Tobin. Schuster alleges that the defendants breached fiduciary duty in Boston's association with Medinol.

Schuster alleges that the breaches will induce the courts to award damages to Medinol, and result in fines from government regulatory agencies. Ultimately Boston will suffer from diminished goodwill and market share, he concludes.

Schuster says the directors should pay these damages caused by the substantial damage to Boston Scientific from their own pockets, not from the company till. He also claims that the defendants caused the company to be involved in illegal activity.

Medinol alleges that Boston Scientific intended to manufacture Medinol's branded stents at a secret facility in Ireland, under the guise of a project known inside the company as BBD ("bring a better deal" than the agreement with Medinol) or "Project Independence".

TheStreet Recommends

Schuster also demands that the BBD activity be eliminated.

In his lawsuit, Schuster cites information from Medinol's suit against Boston Scientific. The Medinol suit documents actions taken by Boston managers and directors to steal intellectual property and knowhow from Medinol and hide the duplicitous actions in an Irish shell company.

The Medinol suit also presents internal Boston memos demonstrating Boston's misrepresentations to the U.S. Food and Drug Administration, and in its own financial reports.

Boston Scientific has acknowledged in Securities and Exchange Commission filings potential "material impact on the financial condition, operations or cash flows of the company" that would result from a judgment in favor of Medinol.

Under a 1995 contract, Medinol was to exclusively supply Boston Scientific with its patented Nir stents and their later generations, while Boston Scientific was to manufacture the balloon delivery system for the stents and to market the combined product worldwide.

Boston Scientific was allowed to establish a production line for stents, but not allowed to operate the line, manufacture stents, or buy such stents from another supplier, unless Medinol failed to meet prearranged quantities of the product, which has not happened in the course of the association.