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CSL calls for witness to testify in $1 billion cartel case

An article published in the Australian Financial Review has provided an update on the class action that has been brought against biopharmaceutical firm CSL (ASX: CSL) in the USA. The allegations at the centre of the class action claim CSL and fellow immune globin and albumin producer Baxter conspired to reduce the supply of two products over a seven-year period.

According to the report in the AFR the class action appears to repeatedly reference the conduct of the US Food and Drug Administration (FDA). In response CSL and Baxter have requested that Dr Weinstein, an official at the FDA during the time of the supposed antitrust violations, testify. The FDA has so far supposedly refused to allow Dr Weinstein to testify which has forced CSL and Baxter to “move to compel” the witness to testify.

As is nearly always the case when legal proceedings are involved, the action against CSL and Baxter is likely to be a drawn-out affair with “no end in sight” according to reporter Eli Greenblat.  In its most recent financial statement release, CSL stated that: “The directors believe that future payment of a material amount in respect of litigation is remote. The Group has disclaimed liability for, and is vigorously defending, all current material claims and actions that have been made.”

It is of course hard for management at CSL, let alone shareholders to really know what the eventual outcome will be. One thing that is almost certain is that the lawyers involved will come out in front.

Foolish takeaway

CSL is a robust company with sound future prospects and even the reported $1 billion plus in damages being sought would not cripple the company. Often the near term uncertainty of legal action can create opportunities to purchase good companies at attractive prices. Investors should be alert to these opportunities as they can present themselves anywhere and at any time.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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