Appellate Division, First Department Unanimously Affirms NYS Supreme Court Ruling in Favor of Kramer Levin Client Conor Medsystems Inc.

On May 29, 2012, the Appellate Division, First Department unanimously affirmed a New York State Supreme Court justice’s ruling that a supply contract between German drugmaker Biotronik AG and Kramer Levin client Conor Medsystems Inc., a unit of Johnson & Johnson, bars Biotronik from seeking $100 million in lost profits stemming from Conor's 2007 CoStar stent recall. Biotronik had sued Conor, the maker of CoStar, over the recall claiming it was unjustified and breached a 2004 supply agreement between the companies that allowed Biotronik to market the stents outside of the U.S., where CoStar was not yet approved. The deal would expire in December 2007 with an automatic renewal for one year unless either party elected to back out before July 2007. In May 2007, Conor recalled and stopped making CoStar following a Johnson & Johnson report that it "did not meet its endpoint" in clinical trials required for U.S. FDA approval. Biotronik claimed breach of contract for the recall, arguing that CoStar was a safe and effective product, and sought damages of $100 million in lost profits. New York State Supreme Court Justice Bernard J. Fried ruled that issues of fact required the denial of Conor's motion for summary judgment on liability, but that the supply contact was clear in that "...the parties did not contemplate that consequential damages in the form of lost profits could be awarded for any breach." Those are the only damages sought by Biotronik in the case.

In affirming Justice Fried’s decision, the First Department held that “[t]he claim for lost resale profits was properly rejected because it is barred by the distribution agreement’s limitation. Contrary to plaintiff’s contention that its lost profits constitute general damages falling outside that limitation, a plaintiff suing to recover profits that it would have made by reselling the defendant’s goods to third parties, as is the case here, is seeking consequential damages.”

Litigation partners Harold P. Weinberger and Kerri Ann Law, and associates Jared I. Heller and Rachel Feinberg represented Conor Medsystems.