West Virginia Pipe Trades Health & Welfare Fund; Employees' Retirement System of the State of Hawaii; Union Asset Management Holding AG Plaintiffs - Appellants
Medtronic, Inc.; William A. Hawkins; Gary L. Ellis; Richard E, Kuntz; Julie Bearcroft; Richard W. Treharne; Martin Yahiro Defendants-Appellees Thomas A. Zdeblick; J. Kenneth Burkus; Scott D. Boden Defendants
Submitted: October 19, 2016
from United States District Court for the District of
Minnesota - Minneapolis
GRUENDER, BEAM, and SHEPHERD, Circuit Judges.
GRUENDER, Circuit Judge.
Virginia Pipe Trades Health and Welfare Fund, Employees'
Retirement System of the State of Hawaii, and Union Asset
Management Holding AG (collectively, "Appellants")
appeal the grant of summary judgment to Medtronic, Inc. in
their securities fraud class action. The district court
granted summary judgment to Medtronic after determining that
Appellants' claims are time-barred. For the reasons
discussed below, we vacate the summary judgment order and
remand for further proceedings.
are retirement and investment funds who brought a
consolidated class action for securities fraud against
Medtronic and several of its officers and senior managers for
actions related to Medtronic's INFUSE product. INFUSE is
the trade name of rhBMP-2, a bone morphogenetic protein that
causes the body to develop new bone tissue. Medtronic
developed INFUSE as an alternative to bone grafting
procedures, and the FDA approved it for use in lower back
spinal fusion surgeries in 2002. In a traditional autograft
spinal fusion procedure, the vertebrae are fused using a bone
graft taken from the patient's hip bone. In the INFUSE
procedure, the vertebrae are fused using a thimble-shaped
titanium cage containing an INFUSE-soaked collagen sponge.
INFUSE is a key component of Medtronic's multi-billion
dollar spinal segment.
sponsored the FDA clinical trials, and all thirteen of the
resulting articles included authoring physicians who had
financial interests in INFUSE. Pharmaceutical companies
frequently sponsor the medical research of their products.
However, the FDA specifically considered conflicts of
interest during the INFUSE approval process. The FDA approved
INFUSE only for use in lumbar spinal fusion surgeries, some
dental surgeries, and for treating certain shin fractures.
However, up to eighty-five percent of INFUSE use was
off-label. In 2008, the FDA issued a public health
notification associating off-label uses of INFUSE with
life-threatening throat and neck swelling. In 2008, an
unrelated party brought a class action against Medtronic
alleging that it violated securities laws by promoting
off-label use of INFUSE. See Minneapolis
Firefighters' Relief Ass'n v. Medtronic, Inc.,
278 F.R.D. 454, 456 (D. Minn. Dec. 12, 2011). In 2011, the
FDA refused to approve AMPLIFY, a high-strength version of
INFUSE, because of concerns it may cause cancer.
2010, articles in the Milwaukee Journal Sentinel
expressed concern that the doctors authoring the
Medtronic-sponsored INFUSE clinical studies had significant
financial ties to Medtronic and reported test results twice
as favorable as those of independent studies. Letters to the
editor of the Journal of Bone and Joint Surgery
raised questions about the link between INFUSE and retrograde
ejaculation (a condition that causes male sterility). One of
the physicians who authored the INFUSE clinical studies, Dr.
Kenneth Burkus, penned a response denying any link. On May
25, 2011, the Milwaukee Journal Sentinel published
an article stating that Medtronic and doctors with financial
ties to Medtronic were aware of the risk of retrograde
ejaculation but did not disclose it.
same day, Dr. Eugene Carragee, an independent doctor from the
Stanford University School of Medicine, published a clinical
study in The Spine Journal linking INFUSE with a
risk of sterility in men. A commentary on Dr. Carragee's
study by Dr. James Kang of the University of Pittsburgh
School of Medicine noted that the original
Medtronic-sponsored publications did not report any adverse
events despite the incidence of retrograde ejaculation, and
Dr. Kang concluded that the conflict of interest was the only
explanation for the difference between the studies. The
New York Times summarized Dr. Carragee's study
and incorporated a response from one of the authors of a
Medtronic-sponsored study, Dr. Thomas Zdeblick, who implied
that the Carragee study was misleading.
22, 2011, the Senate Finance Committee issued a press release
announcing an investigation into Medtronic and INFUSE. The
press release expressed concern over Medtronic's
undisclosed financial ties with doctors. The next day, the
Wall Street Journal summarized the Committee press
release and reported the amount of royalties Dr. Burkus and
Dr. Zdeblick had received. On June 28, 2011, The Spine
Journal devoted its entire issue to articles concerning
INFUSE and included an article authored by Dr. Carragee that
extensively analyzed the Medtronic-sponsored clinical
studies. Dr. Carragee explained that the studies employed
significantly flawed methodologies and failed to report
adverse events. However, Dr. Carragee specifically refrained
from drawing any conclusion about the doctors' motives.
October 2012, the Senate Finance Committee released its
investigation report on INFUSE. The Committee found that
Medtronic "was heavily involved in drafting, editing,
and shaping the content of medical journal articles authored
by its physician consultants who received significant amounts
of money through royalties and consulting fees from
Medtronic." The Committee also found that Medtronic
employees added language designed to exaggerate the
disadvantages of standard spinal fusion techniques and
recommended against publishing a complete list of adverse
events associated with INFUSE. Finally, the committee found
that Medtronic had attempted to adopt weaker safety rules for
its clinical trials.
filed suit on June 27, 2013 against Medtronic, its officers
and senior managers, and the doctors who authored the
Medtronic-sponsored clinical studies. Appellants alleged a
number of securities laws violations, including making false
statements and employing a scheme to defraud the market. The
district court initially dismissed Appellants' scheme
liability claims against the physician-authors and dismissed
some of the false statement claims against Medtronic.
However, the district court did not dismiss one false
statement claim, the scheme liability claim, or the control
liability claim against Medtronic. The litigation proceeded,
and Medtronic eventually moved for summary judgment on all
claims. The district court granted the motion, holding that
the two-year statute of limitations barred all claims.
only appeal the grant of summary judgment on their scheme
liability claim. In addition to the statute of limitations,
Medtronic argues alternatively that Janus Capital Group,
Inc. v. First Derivative Traders, 564 U.S. 135 (2011),
and Stoneridge Investment Partners, LLC v.
Scientific-Atlanta, Inc., 552 U.S. 148 (2008), bar
Appellants' scheme liability claim as a matter ...