(CN) - The 7th Circuit upheld dismissal of a class action accusing a Boston Scientific subsidiary of misleading investors by concealing a design flaw in its heart defibrillators.
Guidant Corp. knew that its Ventak Prizm 2 DR defibrillators were prone to short circuit, but it kept making and selling them without telling physicians or patients about the design defect, according to shareholders.
It then issued press releases containing "highly positive news" about growth prospects for its medical devices, the plaintiffs claimed. And when the company announced a proposed buyout by Johnson & Johnson in 2004, it allegedly kept silent about the liability risks it faced from defective products.
In May 2005, prompted by an exposé in The New York Times, Guidant finally disclosed the reported problems with its defibrillators and pacemakers, causing its stock price to plummet. Investors reportedly lost more than $1 billion.
The Food and Drug Administration issued a national recall on June 17, 2005.
The news caused Johnson & Johnson to back off the merger, though Boston Scientific entered the bidding and ultimately bought Guidant for $80 per share in 2006.
The Chicago-based appeals court declined to overturn the lower court's ruling that investors had failed to point to specific misleading statements or provide evidence showing that Guidant knew about the product flaws.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.