The U.S. Court of Appeals for the 7th Circuit recently handed medical device manufacturer Zimmer Biomet Holdings a victory in deciding the company’s description of a former employee as a “significant and unacceptable compliance risk” did not constitute defamation.
The federal appeals court, affirming a lower court’s decision, concluded Biomet’s concern about the former employee being a compliance risk is a mere statement of opinion unable to be proven false.
Twice in less than a decade, the U.S. Department of Justice has investigated Biomet for problems complying with the Foreign Corrupt Practices Act—and found the company lacking in its adherence to the law. In 2012, Biomet entered into a deferred prosecution agreement with the DOJ to resolve charges against it. As part of the deal, the company had to pay a $17.3 million fine and engage an independent compliance monitor to assess the company’s adherence to the terms of its deal with the DOJ.
Part of Biomet’s problem concerned a Brazilian distributor that had bribed healthcare providers to promote and market Biomet’s products. After Biomet terminated its agreement with that distributor, Sergio Galindo, the person who ran the distribution company went to work for a different distributor.
Just a year after settling with the DOJ, more problems came to light after an anonymous whistleblower reported the company was continuing to work with Galindo. Biomet alerted the monitor as well as the DOJ, and the federal government began another investigation into corruption at the company.
‘Fall guy’ or fairly treated?
Ultimately, Biomet again resolved charges against it by entering into another deferred prosecution agreement with the DOJ and paying an additional $17.4 million penalty. The company also suspended and eventually terminated Alejandro Yeatts, who was a business manager for South America at Biomet Argentina, a subsidiary of Zimmer Biomet Holdings. The company had also placed Yeatts on a “restricted parties list” of people who posed a risk to the company’s compliance with anti-corruption and anti-bribery laws.
Biomet had created that restricted parties list following its 2012 deal with the federal government on the recommendation of the independent compliance monitor, the 7th Circuit explained. Yeatts’ name had been included on it along with mention of his suspension from work after his continued dealings with Galindo came to light. Biomet had determined “Yeatts continued to sell and market Biomet products with Galindo despite his knowledge that Galindo had bribed doctors and his knowledge that Galindo” was forbidden to market the company’s products.
Yeatts’ name appeared on the list along with a notation he had been “suspended in connection with a corruption-related investigation involving Biomet Brazil.” Yeatts, however, maintained his supervisor as well as Biomet’s legal department OK’d his interactions with Galindo and accused the company of making him a “fall guy.” Biomet suspended him in 2014 and terminated him in 2015, prompting Yeatts to sue for defamation.
Yeatts maintained his presence on the list identifying him as a compliance risk falsely suggested he engaged in criminal conduct. He also reported neither the company nor the DOJ interviewed him as part of their investigations. A lower court, however, concluded calling Yeatts a compliance risk was simply an “opinion” of Biomet and one that couldn’t be disproved.
“Yeatts’s focus on the alleged lack of evidence that he engaged in criminal conduct misses the point,” the 7th Circuit wrote. “Even if there were zero evidence he engaged in criminal conduct, that would not prove false Biomet’s concern that Yeatts posed a compliance risk.”
It’s like being a bad lawyer
Calling someone a compliance risk is like saying you have a bad lawyer. It’s “to express an opinion that is so difficult to verify or refute that it cannot feasibly be made a subject of inquiry by a jury,” the 7th Circuit wrote, quoting an earlier decision. “The inability to prove the statement false demonstrates that it is a statement of opinion, beyond the reach of defamation law,” the appeals court concluded. It affirmed the lower court’s decision in favor of Biomet.
Lori Tripoli is a writer based in the greater New York City area who focuses on legal and regulatory issues.