On August 4, 2011, the United States Court of Appeals for the First Circuit unanimously affirmed a decision by the United States District Court for the District of Massachusetts granting summary judgment in favor of Shearman & Sterling’s clients, Boston Scientific Corporation and certain of its current and former executives, in a Section 10(b) securities class action (Mississippi Public Employees’ Retirement System v. Boston Scientific Corporation, et al., No. 10-1663). The plaintiff, Mississippi Public Employees’ Retirement System, alleged that the defendants withheld material information and made misleading statements about certain of Boston Scientific’s coronary stent systems. When some of those stents were subsequently recalled, the company’s stock price dropped 10.3%.

The First Circuit’s decision was based on its finding that the plaintiff had failed to sustain its burden with respect to the essential element of scienter. The case turned on what the defendants knew and disclosed regarding a deflation issue with some of the balloons used to deploy the stents (“no deflate”) —the issue that led to the recalls. The First Circuit held that the plaintiff’s evidence considered individually and as a whole made clear that no reasonable jury could find that the defendants recklessly misled the market about a significant risk of no deflates or the need for a recall, much less that they intentionally did so. The First Circuit also found the plaintiff’s insider trading allegations to be unavailing on the ground that there was nothing suspicious or unusual about the timing or amount of the individual defendants’ stock sales during the class period.

The Shearman & Sterling team included partners Stuart J. Baskin (New York-Litigation), John Gueli (New York-Litigation) and Kirsten Nelson Cunha (New York-Litigation), and associates Christopher R. Fenton (New York-Litigation), Martha Sabo (New York-Litigation), Robert Bosslet (New York-Litigation), Kyla J. Stewart (New York-Litigation) and Casey O’Neill (New York-Litigation).