April 2, 2008 / 5:18 PM / in 10 years

U.S. judge orders Biovail founder to turn over laptop

NEW YORK (Reuters) - A former Bank of America Corp stock analyst who is suing drug maker Biovail Corp for defamation can conduct a forensic search of company founder Eugene Melnyk’s laptop computer for deleted e-mails, a judge has ruled.

The ruling permits Jerry Treppel, the plaintiff, to search for additional electronic evidence that could be relevant to his case. Treppel sued the Canadian company and Melnyk in 2003, claiming they launched a smear campaign against him after he urged investors to sell the stock.

The defendants deny the allegations.

The lawsuit in U.S. District Court in Manhattan is one of many legal headaches for Biovail, a specialty pharmaceutical company based outside Toronto.

Biovail agreed last month to pay $10 million to settle a U.S. Securities and Exchange Commission probe into fraudulent accounting allegations. Four current and former officers, including Melnyk, still face charges from the regulator.

Melnyk, Biovail’s biggest shareholder, has been at odds with the company over its financial performance. He plans to propose an alternative slate of nominees for the board of directors at the annual meeting in June.

Treppel, now working at Wheaton Capital Management LLC in New Jersey, contends that Biovail and others did not properly retain all electronic evidence related to his claims and must produce additional electronically stored information.

The defendants “failed to take adequate measures to prevent the destruction of discoverable materials,” U.S. Magistrate Judge James Francis said in a written ruling on Wednesday. “Accordingly, the plaintiff is entitled to a remedy.”

He said that Treppel could undertake, at the defendants’ expense, a “thorough forensic examination of Mr. Melnyk’s laptop in an effort to recover additional relevant e-mails that were deleted by Mr. Melnyk.”

An attorney for Treppel was pleased with the ruling.

“I can’t wait to see what’s on Melnyk’s laptop,” said attorney James Batson, a partner at Liddle & Robinson LLP. “At the end of the day, we think that we will win this case with the evidence, and that this ruling makes it possible for us to get a lot more of the evidence of what really happened.”

A Biovail representative was not immediately available for comment, nor was a spokesman for Melnyk.

A trial date has not yet been set, but Batson said he hoped the proceeding could begin by the end of the year.

Any evidence recovered from Melnyk’s computer can first be reviewed by the defendants, the judge said. He also ordered Biovail to search back-up tapes from electronic servers from several relevant dates for other data.

The judge, however, denied Treppel’s petition for a more serious sanction that would instruct the trial jury that the missing documents contained evidence that would be unfavorable to the defense.

Reporting by Martha Graybow; Editing by Tim Dobbyn

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