Biovail Suit Against SAC Capital Thrown Out by Judge

Date: Friday, August 21, 2009
Author: Joe Schneider, Bloomberg

A Biovail Corp. lawsuit against SAC Capital Management LLC was thrown out by a New Jersey judge for failing to state a claim.

Biovail accused hedge funds including SAC and Sigma Capital Management of conspiring in a short-selling scheme to drive down the drugmaker’s share price. The Mississauga, Ontario-based company also claimed Gradient Analytics Inc. helped the hedge funds by writing false reports about Biovail.

“Biovail fails to elicit any specific damages, and instead relies upon a general diminution theory,” New Jersey Superior Court Judge Donald Goldman wrote in a 51-page ruling released today. “Biovail’s claims must be dismissed.”

A federal judge in February dismissed a similar lawsuit filed by Biovail shareholders. U.S. District Judge Stanley Chesler in Newark, New Jersey, said the investors’ lawyers failed to properly investigate the allegations and violated a New York judge’s sealing order by including certain information in their filings.

Since initiating the lawsuits in 2006, Biovail has agreed to pay $5.4 million to the Ontario Securities Commission to settle claims of accounting improprieties and paid $138 million to settle a shareholder lawsuit alleging it made false statements to artificially inflate its stock price.

Biovail also agreed in March 2008 to pay the U.S. Securities and Exchange Commission $10 million to settle legal claims against the company.

“Biovail’s claims against SAC were a cynical attempt to manipulate the legal process in order to divert attention from its own improper conduct,” Jonathan Gasthalter, an SAC spokesman, said in an e-mail.

Nelson Isabel, a Biovail spokesman, didn’t immediately respond to a request for comment.

The case is Biovail Corp. v. SAC Capital Management LLC, L- 1583-06, Superior Court, Essex County, New Jersey.

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net