Bloomberg News

3M ‘Blackmail’ Allegations Against Porton Capital Dismissed

February 15, 2012

(Updates with 3M lawyer’s comment in ninth paragraph.)

Feb. 2 (Bloomberg) -- 3M Co., the maker of Scotch tape and Post-It Notes, lost its bid to sue Porton Capital Inc. over an alleged $30 million extortion scheme after failing to persuade a federal judge the case could be tried in his Washington court.

U.S. District Judge Robert Wilkins ruled today that 3M failed to show the court had jurisdiction over Porton, which has offices in London and in Dubai. Wilkins ruled that a defamation claim against Porton’s Washington lawyer, Lanny Davis, can go forward.

“It is undisputed that the Porton defendants themselves were never physically present in the District of Columbia and that they never personally performed any of the alleged tortious acts here,” Wilkins said.

The case involves 3M’s acquisition from Porton and other investors of Acolyte Biomedica Ltd., which was developing products to detect microorganisms, according to the complaint.

Porton and Ploughshare Innovations Ltd., two of the shareholders who sold their stakes in the technology company, sued St. Paul, Minnesota-based 3M in London over the deal. They claimed they lost $56 million in potential profits because 3M failed to properly market Acolyte’s MRSA-detecting technology, BacLite. 3M called BacLite a failed product.

A London judge in November ordered 3M to pay about $1.3 million in damages to Porton and Ploughshare.

In the Washington case, Porton and its chief executive officer, Harvey Boulter, are accused of trying to extort $30 million in connection with the U.K. lawsuit.

‘Transatlantic Victory’

“This completes a resounding transatlantic victory for Porton,” Porton’s lawyer, Lee Wolosky of Boies, Schiller & Flexner LLP, said in an interview. “3M’s U.S. blackmail claims were nothing more than a publicity stunt intended to distract attention from the U.K. trial.”

William A. Brewer III, a lawyer for 3M, said in a statement that the company “looks forward to pursuing its defamation claims” against Davis.

“We are eager to conduct discovery on these claims -– and bring this case to trial as quickly as possible,” Brewer said.

3M initially filed the lawsuit in New York State Supreme Court. The Washington lawsuit, which added Davis, was filed in August.

3M accused Davis of being “the mastermind” of a scheme to extract millions from the company by launching “an unrelenting bombardment of sensational and false accusations against 3M in the global media,” according to its amended complaint.

‘Actual Malice’

In today’s ruling, Wilkins said that some of the public statements made by Davis “reflect actual malice and/or bad faith on their face and cannot be dismissed at this stage.” Wilkins said whether 3M can substantiate its defamation claims are “questions for another day.”

Davis, a one-time special counsel to President Bill Clinton, argued his statements are protected by the so-called fair comment privilege.

Davis also claimed some of the statements were related to a petition he filed with the Food and Drug Administration on behalf of Porton entities seeking an investigation into 3M’s application for FDA approval of BacLite.

“We are confident that the defamation case is utterly baseless -- and that what Davis said in explaining his petition to the U.S. government was true,” Raymond Mullady of Blank Rome LLP, who represents Davis, said in an e-mailed statement.

He added that under the rules, Wilkins must assume 3M’s allegations are true, including allegations about statements Davis never made.

Wilkins’s ruling noted that Boulter has yet to be served as a defendant in the case.

The case is 3M Co. v. Boulter, 11-01527, U.S. District Court, District of Columbia (Washington).

--With assistance from Don Jeffrey in New York. Editors: Fred Strasser, Charles Carter

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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