Kokocinski v. Collins, Jr., No. 15-3519 (8th Cir. 2017)
Annotate this CasePlaintiff filed a shareholder derivative action on behalf of Medtronic, Inc., against current and former directors and officers of Medtronic, and against Medtronic as a nominal defendant. Plaintiff's complaint alleged various bad acts and false and misleading statements stemming from Medtronic's alleged improper promotion to physicians of the "off-label" use of its "Infuse" product. The district court dismissed the action based on a report by a special litigation committee (SLC). The court concluded that defendants' motion to terminate the litigation based on the SLC report could not be construed as a motion under Rule 12(b)(6) nor one arising under Rule 56; the court agreed with the district court and the Eleventh Circuit that the closest fit for a motion to terminate in the Federal Rules was Rule 23.1(c); the proper standard of review was for an abuse of the district court's discretion; the district court did not err in deferring to the SLC under Minnesota's business judgment rule (BJR) where the SLC possessed a disinterested independence, and the SLC's investigative methodologies and procedures were adequate, appropriate, and pursued in good faith; and the district court did not abuse its discretion by denying plaintiff's motion for discovery. Accordingly, the court affirmed the judgment.
Court Description: Beam, Author, with Gruender and Shepherd, Circuit Judges] Civil case - Shareholder Derivative Action. In action seeking damages against current and former directors and officers of Medtronic concerning its marketing of the "Infuse" surgically-implanted bone growth stimulation device, defendants' motion to terminate the litigation (which it has the right to pursue) based on the report of the Special Litigation Committee (SLC) cannot be construed as a Rule 12(b)(6) motion or one arising under Rule 56's summary judgment procedures; the closest fit for the motion is Rule 23.1(C) which provides that a derivative action may be settled, voluntarily dismissed or compromised only with the court's approval; the proper standard for review of the district court's decision is abuse of discretion; the SLC formed by Medtronic was a valid SLC and the district court did not err in deferring to its decision to terminate the litigation because it possessed a disinterested independence, and its investigative methodologies and procedures were adequate, appropriate and pursued in good faith; the district court did not abuse its discretion in declining to order discovery before granting the motion to terminate.
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