IRVINE – The U.S. Court of Appeals for the 9th Circuit upheld a
federal-court denial of Medtronic’s motions for judgment as a
matter of law and a new trial in the company's lawsuit with Pabban
The three-judge panel also upheld the district court’s decision
to deny Medtronic’s claim that it improperly instructed the jury
and improperly awarded legal fees to Pabban, an Irvine-based company
that had developed a bone-cement delivery system that Medtronic
claimed was faulty.
Joe Thomas of Thomas Whitelaw and Kolegraff LLP, an attorney who
represented Pabban, told Law360 in a Nov. 16 interview that Pabban
was happy with the verdict.
“We’re delighted that the court affirmed the judgment in its
entirety,” he said. “We believe there was no evidence to support
the finding in any other way, and the court of appeal reviewed the
record and affirmed it.”
The panel affirmed the 2014 jury verdict in favor of Pabban,
ignoring the argument made by Medtronic and its subsidiary, Kyphon
SARL, that an asset-purchase agreement for Pabban's Natrix System
included certain language that made the deal null and void.
Medtronic argued the verdict should be overturned in light of
evidence that more than a third of the devices Pabban delivered to
Kyphon had leaks that rendered them unmarketable, the Law360 article
The appeals panel found that a new trial was not needed, as the
trial court had properly interpreted the terms of the parties'
purchase agreement and properly instructed the jury.
“When the evidence is viewed in the light most favorable to
Pabban, the jury was presented with sufficient evidence from which it
could conclude that Pabban’s key personnel had no actual knowledge
that the saline bags were leaking due to an inherent defect in the
Natrix System — as opposed to a packaging issue — such that the
Natrix System was not fit for sale by Pabban to Kyphon,” the 9th
Circuit panel said in its opinion.
Mass Device magazine further quoted the court’s agreement
with Judge Beverly Reid O’Connell’s determination of the
difference between Natrix being good enough to be acquired in the
deal and being good enough to go to market.
“Because the district court properly interpreted ‘of good
enough quality to be sold’ to mean ‘of good enough quality to be
sold by Pabban to Kyphon,’ Kyphon is without any argument that the
evidence compelled a different verdict,” the court opinion said.
“Similarly, Kyphon has failed to demonstrate that the district
court’s denial of Kyphon’s alternative motion for a new trial was
an abuse of discretion. The jury’s verdict was not against the
clear weight of the evidence such that the district court should have
granted a new trial.”
In August 2008, Medtronic agreed to acquire Natrix assets from
Pabban for $18.8 million, as well as other milestone payments up to
$15 million, according to the Mass Device article.
Medtronic paid the $18.8 million, but refused further payments.
Medtronic also ended its supply deal with a Pabban subsidiary,
claiming that Pabban concealed problems with the Natrix system.
Pabban then sued Medtronic in March 2010 for the additional payments
Medtronic refused to pay.
According to the Law360 article, Medtronic argued at trial that it
had sought to purchase the device in order to get to market quickly,
and that Pabban had committed fraud in representing that the Natrix
system was ready to go to market when it was not.
“Pabban countered that Medtronic had extensive opportunities to
conduct due diligence and did so to its satisfaction before signing
the purchase agreement,” the article said.
In May 2014, the jury sided with Pabban, finding no breach in the
agreement. The appeals court upheld the jury's decision.