March 29, 2024

Lawsuits and Intrigue Over 3M Diagnostic Test

It began three years ago as a routine lawsuit over a diagnostic test to be marketed by 3M that detected a highly resistant bacteria often found in hospitals. But it has since escalated into a trans-Atlantic swill of suits and countersuits that now ensnare 3M’s chairman and chief executive, Britain’s secretary of defense and a well-known Washington lawyer and lobbyist, Lanny J. Davis.

In one lawsuit, 3M charged that a big investor in the diagnostic test had tried to blackmail the company into settling its lawsuit for $30 million by suggesting that a knighthood conferred on the 3M chief executive, George W. Buckley, could be derailed.

In turn, that big investor, Harvey Boulter, filed a libel suit against 3M, Mr. Buckley and a lawyer for the company. And in a legal filing on Thursday, 3M suggested Mr. Davis — probably best known for his role in defending President Clinton during his impeachment — had been part of a conspiracy to shake down the company.

Mr. Davis, who represents Mr. Boulter’s equity fund, had masterminded a series of attacks on 3M that “began as a defamatory media blitz and culminated in the outright attempted blackmail of 3M and its chairman,” the company asserts in papers filed in state Supreme Court in Manhattan.

A 3M spokeswoman declined to make Mr. Buckley available for comment.

Mr. Davis said the company’s filing was untrue and intended to divert attention from 3M’s own problems. “I am accustomed when speaking publicly in only dealing in facts that can be documented,” he said.

The dispute can be traced to 2005 when the equity fund headed by Mr. Boulter acquired a majority interest in the diagnostic test, which was based on technology developed by the British Ministry of Defense. The test, known as BacLite, offered a faster way to identify hospital patients who were carriers of the bacteria methicillin-resistant Staphylococcus aureus, or MRSA. In recent years, MRSA infections, which are resistant to antibiotics, have caused patient deaths and injuries.

Initial studies indicated that BacLite was highly accurate and, in 2007, 3M struck a multimillion-dollar deal to acquire the test, though the majority of that payout was tied to future BacLite sales. Just a year later, however, 3M dropped BacLite, saying that its subsequent studies found a high rate of false results. By then, several competing MRSA tests had also been introduced.

Entities associated with Mr. Boulter’s fund, the Porton Group, responded with a lawsuit filed in 2008 in London, claiming that 3M had failed to fulfill its agreement to diligently market BacLite. And over the next three years, the case puttered along quietly until just before it went to trial last month.

Several months ago, Mr. Davis began firing off a series of salvos on behalf of Porton. In May, Mr. Davis and some patients held a demonstration outside 3M’s corporate headquarters in St. Paul, at which he accused 3M of abandoning a “lifesaving” technology.

In addition, Mr. Davis filed a petition with the Food and Drug Administration asking it to investigate how 3M had conducted its tests of BacLite, which he says the company botched. He also helped set up a Web site, www.mrsa-injustice.com, that tells the dispute from the side of Mr. Boulter’s fund.

Early last month, Queen Elizabeth announced that Mr. Buckley, who holds American and British passports, would receive a knighthood. And as the lawsuit against 3M began to unfold in a London court, Mr. Davis and 3M’s outside lawyer, William A. Brewer III, spoke about a settlement, though those discussions apparently did not advance far.

Then, in mid-June, Mr. Davis suggested that Mr. Brewer and Mr. Boulter speak directly with each other. Soon, accusations began to fly.

To hear Mr. Brewer tell it, he was biking in Sag Harbor, N.Y., when he received a cellphone call from Mr. Boulter, who had just arrived in Italy from Dubai, where his fund is based, and was driving down the coast to reach his yacht.

After exchanging pleasantries, Mr. Brewer said that the businessman began making references to talks about BacLite he had been having with Liam Fox, the British defense secretary. The call between the two men then broke off, Mr. Brewer said, as Mr. Boulter drove through a series of tunnels along the Italian coast. Not long after, the lawyer received a lengthy e-mail from Mr. Boulter that 3M said in the lawsuit contained the blackmail threat.

Along with the reference to the “embarrassing situation of George’s knighthood,” Mr. Boulter also wrote in the e-mail that he had a lengthy conversation earlier that day with the defense secretary on “our current favorite topic.” He stated that British officials viewed 3M’s decision not to market BacLite as a violation of trust and that, while 3M might prevail in a courtroom, there could be business ramifications for the company.

“It might leave Gov quietly seething for a while, with ramifications for a while — they have memories like elephants,” he wrote. He suggested that 3M settle the case, adding that at a “headline of $30mn+ you will allow MoD to internally save face.”

Mr. Boulter rejected any suggestion that his e-mail contained a threat to 3M, adding that he had discussed the note’s contents with Mr. Brewer before sending it. He also said that his reference to his discussion with Mr. Fox about “our current favorite subject” was not about BacLite.

“I thought I was in a good-faith confidential settlement discussion,” Mr. Boulter said.

Mr. Brewer said that Mr. Boulter’s threat was clear and that he reinforced it in a second e-mail, in which Mr. Boulter cited Mr. Fox again, writing “I need to tell something” to him.

“3M quickly decided that the only way to treat this type of behavior was to push it out into the sunlight immediately,” Mr. Brewer said.

Mr. Boulter said that he and the defense secretary had briefly discussed the BacLite lawsuit as part of a broader conversation and that he brought up the potential public relations problems for Mr. Buckley given his knighthood and 3M’s behavior in the case. “I said it was unfortunate because it was going to attract a lot of media attention,” Mr. Boulter said.

Asked about Mr. Boulter’s comments, a spokesman for the ministry of defense said that Mr. Fox and Mr. Boulter had not discussed the BacLite case or anyone’s knighthood.

A decision in the MRSA-related lawsuit against 3M is not expected for some time.

Article source: http://www.nytimes.com/2011/07/22/business/in-3m-case-lawsuits-and-intrigue-over-a-medical-test.html?partner=rss&emc=rss