Boston Scientific Wins Stock Drop Lawsuit

November 5, 2008 ( - A federal judge in Massachusetts has decided that two former Boston Scientific Corp. employees who sold more company stock than they purchased did not have the legal right to pursue a stock drop case against their former employer.

U.S. District Judge Joseph L. Tauro of the U.S. District Court for the District of Massachusetts ruled that because the two plaintiffs’ sold more stock than they purchased, they likely were not financially injured by any potential misdeed by the employer and therefore, lacked constitutional standing.

So, they should not be allowed to pursue their claim that Boston Scientific imprudently kept company stock as an available retirement plan stock even though the share price was artificially inflated, violating the Employee Retirement Income Security Act (ERISA), Tauro asserted.    Because of that, Tauro also turned aside requests to certify the case as a class action.

“Where a plaintiff’s class period sales exceed purchases, the plaintiff has most likely benefitted from any alleged inflation in the stock price for that period. Plan participants who benefit from a fiduciary’s breach of duty suffer no injury and have no constitutional standing,” Tauro ruled, in throwing out the suit by Douglas Fletcher and Michael Lowe.

In August 2007, Tauro denied Boston Scientific’s motion to dismiss the employees’ lawsuit for lack of statutory standing under ERISA (See  More Cashed-Out Participants Get Go Ahead for Fiduciary Breach Claim ). The court reasoned in that decision that the employees still qualified as plan participants, even though they had all cashed out of Boston Scientific’s tax code Section 401(k) plan.

To have constitutional standing, Fletcher and Lowe would need to show that they suffered an injury in fact that was fairly traceable to the defendants’ conduct, the court said.

The case is In re Boston Scientific Corp. ERISA Litigation,   D. Mass., No. 06-10105-JLT, 11/3/08.