Canadian drug company Biovail Corp. has fired Kasowitz Benson Torres & Friedman LLP, the law firm that engineered the company's high-profile lawsuit that claimed hedge funds and research analysts colluded to depress its stock price.

Kasowitz Benson, which is based in New York, is embroiled in a legal controversy over whether it willfully violated a protective order when it used information subpoenaed from Banc of America Securities in a shareholder suit in New York Federal court. That information was used to draft Biovail's February 2006 complaint against SAC Capital Management LLC, Sigma Capital Management LLC, Gradient Analytics Inc., Gerson Lehrman Group, former Banc of America Securities analyst David Maris and others.

Judge Richard Owen presides over the shareholder suit filed against Biovail in 2003. For the last month, Owen has been presiding over hearings to probe the violation of the protective order. Those hearings are scheduled to resume in early April.

Biovail's public relations firm Sitrick & Co. said in an e-mail statement that the company terminated Kasowitz Benson because of "issues arising from proceedings before Judge Owen." Biovail said it "maintains confidence in its pending lawsuits."

A spokesman for Kasowitz Benson had no comment.

A lawyer defending Kasowitz Benson during the hearings in front of Owen earlier this week disclosed documents against Biovail's will. The lawyer argued in court that Kasowitz Benson had a right to disclose the information because the firm was being accused of wrongful conduct.

"We have asked Biovail to come forward and clarify the record. They have declined to do so to date," said John Siffert of Lankler Siffert & Whohl LLP. "We are not saying that Biovail had an appreciation for the protective order barring what we did anymore than we did, but at least they knew about the protective order and didn't tell us," Siffert said.

Evidence introduced in court shows that Kasowitz Benson lawyers continued to use and share material obtained from Banc of America after they were told about a March 2005 court order preventing its use in other venues.

According to evidence that came up during hearings in front of Owen, Kasowitz Benson drafted and circulated to several law firms a shareholder complaint that was later filed against SAC and others in New Jersey federal court. That complaint closely mirrors the one filed by Biovail against the same defendants a month earlier and uses some of the same information obtained from Banc of America.

Lawyers representing shareholders suing Biovail in New York federal court argued in a letter sent to Judge Owen last week that Biovail's lawyers drafted and caused the filing of the New Jersey shareholder complaint to hamper class certification in New York.

Kasowitz Benson also represents Fairfax Financial Holdings, a Canadian insurer who sued some of the same defendants and alleges a similar conspiracy to depress its stock.

Last June, Kasowitz Benson partner Marc Kasowitz testified in front of a Senate hearing about hedge funds, alleging that supposedly "independent" research reports are routinely bought and paid for by short-selling hedge funds, and warned lawmakers that "the potential for gross fraud and abuse is stunning."