Judge orders Teva to honor Baxter deal in hep C litigation

Score one for Baxter International ($BAX) in the ongoing saga of a hepatitis outbreak in Nevada. The outbreak has been linked to tainted vials of propofol, an anaesthetic made by Teva Pharmaceutical Industries ($TEVA) and distributed by Baxter--and it has spawned several hundred lawsuits from infected patients.

But now, a Delaware judge has ruled that Teva has to honor an agreement to cover Baxter's potential liability on legal claims arising from that outbreak. That means Teva faces a $500 million punitive damages award in one of the patient lawsuits--which was brought by Nevada resident Henry Chanin--rather than sharing $144 million of the liability with Baxter as a jury had ordered.

The indemnification agreement had already been validated by an arbitration panel. Teva sued, hoping to persuade a court to let it share the pain--and claiming that the Baxter liability deal didn't extend to punitive damages.

Judge Travis Laster put that hope to rest, ruling the arbitration panel was correct in saying Teva should be bound by the "valid and enforceable" agreement. The indemnification extends to "any award of punitive damages" in the Chanin case or "any other case" over the hepatitis outbreak in Nevada, the ruling states (as quoted by Bloomberg). Teva has agreed to settle about a third of the hepatitis lawsuits.

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