Judge Donald S. Goldman of the Superior Court of New Jersey dismissed Biovail's (NYSE: BVF) lawsuit against SAC Capital Advisors last week, saying that he lacked jurisdiction.The lawsuit, originally filed in 2006, accuses SAC of colluding with analysts and other firms to produce misleading research designed to drive down the company's share price -- allowing the firm to profit from its large short position in the company's stock
Goldman wrote that he had not evaluated the merit of Biovail's claims, but did say that the company had failed to show that it was entitled to damages, even if its allegations were true. Another judge who had dismissed another Biovail-related lawsuit said that the company's history of securities fraud and run-ins with regulators gave the case a "tainted origin".
On his blog, Gary Weiss writes that the issue of Biovail is about something more serious than one company's junk lawsuits: "Here's the unanswered question: what is the SEC going to do about the larger issue raised by this lawsuit, which is the nagging problem of issuer retaliation? That's the practice of companies retaliating against analysts, investors and other critics. Biovail raised issuer retaliation to a high art, and was filing lawsuits against shorts since back in the early 1990s.
"We are gratified that the court has dismissed Biovail's patently baseless claims, which we have always maintained had no merit," Jonathan Gasthalter, a spokesman for SAC told the New York Times. "Biovail's claims were a cynical attempt to manipulate the legal process in order to divert attention from its own improper conduct."
If these lawsuits are indeed a simple case of diversion -- as most impartial observers believe they are -- then there is a serious SLAPP problem here that needs to be confronted by regulators.
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