Hedge Fund Management Conglomerate S.A.C. Capital Advisors Strikes Back, Countersues Biovail Corp. for Filing Vexatious Lawsuit

On February 22, 2006, Biovail Corporation, a publicly-traded Canadian pharmaceutical company, sued S.A.C. Capital Advisors LP (SAC), the $12 billion hedge fund manager led by Steven A. Cohen, in New Jersey Superior Court.  Biovail accused SAC and numerous others of engaging in a market manipulation scheme to devalue its shares by allegedly fabricating reports about Biovail misconduct and purportedly engaging in a short selling conspiracy of its stock.  Then, on March 24, 2006, Biovail allegedly directed the filing of a proposed class action lawsuit by Biovail shareholders against SAC in the U.S. District Court for the District of New Jersey, one which “parroted [Biovail’s] complaint almost verbatim, adding a federal securities fraud claim.”  As previously reported in the Hedge Fund Law Report, in 2009, the respective courts dismissed these causes of action on the pleadings.  See “New Jersey Court Dismisses Biovail Suit Against Hedge Fund Manager S.A.C. Capital Advisors,” Vol. 2, No. 35 (Sep. 2, 2009).  On February 17, 2010, SAC struck back against Biovail by filing a lawsuit in the U.S. District Court for the District of Connecticut.  Describing Biovail’s conduct as “false, scandalous and outrageous,” SAC asserted causes of action for vexatious suit and abuse of process.  SAC alleged that Biovail manufactured its lawsuit against it to direct attention away from the well-founded class action litigation pending against it by its own shareholders and from developing criminal and regulatory inquiries by the U.S. and Canadian governments, actions which eventually resulted in a class action settlement as well as serious criminal and regulatory sanctions and fines.  We detail the background of the allegations.

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