Facts

Plaintiffs, a small corporation and distributor of medical products, sued defendant Healthtronics Inc., a multi-national corporation for breach of contract and fraud. Defendant had an exclusive distribution arrangement to market Plaintiffs' surgical laser. Plaintiff claimed that rather than using its best efforts to market the laser to the entire-medical community, Defendant tried to maximize their own profits by entering into partnerships directly with urologists and refusing to sell the lasers outside those partnerships.

In September and November 2008, Plaintiffs served Defendant with a notice to cure its anticipatory breach or they would withdraw from the contract because of Defendant's failure to perform. Correspondence between attorneys in September and November 2008 attempted to resolve the anticipatory breach. However, while negotiations were pending, Defendant sued Plaintiffs in Texas. Plaintiffs contended this was in violation of the provisions of the contract, which stipulated that any litigation on the contract needed to be in Alameda County Superior Court in the State of California. The case was litigated for a year and a half in Texas before the Texas Supreme Court finally ordered the matter back to Alameda County Superior Court. Defendants then removed the case to the federal court, and after yet another delay, it was remanded back to Alameda County Superior Court.

Plaintiffs conducted discovery and Defendant produced over 16,000 documents related to the case. In those documents, Plaintiffs found evidence that Defendant would not see Plaintiffs' product outside its partnership and that there would be "no direct sales" of the product. Defendant's CEO and various vice presidents were deposed in California and Texas.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that Defendant breached the contract by refusing to use their best efforts and good faith efforts and breached other parts of the contract by not selling the product throughout the entire United States. Plaintiffs contended they established "no fly zones" where they refused to sell. Plaintiffs contended Defendant did not give Plaintiff rolling forecasts for the sale and distribution of the laser, as required by the contract.

Plaintiffs further contended that Defendant lied about its intent to sell the product to urologists outside the partnerships that they controlled (approximately one-third of the urologists in the United States) and that Defendant never intended to distribute the laser to anyone other than their own partners.

DEFENDANT'S CONTENTIONS:
Defendant disputed Plaintiffs' contentions, asserting that they had in fact spent a great deal of money developing the product and were using their best efforts to sell it. They denied any misrepresentations and claimed Plaintiffs breached the contract by promoting a new advanced laser product in violation of the exclusive distribution contract. These issues were raised in a cross-complaint against Plaintiff.

Settlement Discussions

Plaintiffs' final demand was $4 million.

Result

Plaintiffs' verdict for $9,263,350 and $1,745,740 for attorney's fees. Defense verdict on Defendant's cross-complaint.

Other Information

The jury found that Defendant breached the contract with Plaintiffs and made intentional and negligent misrepresentations to Plaintiffs. During the three-week trial, Defendants made several motions to exclude evidence, to strike Plaintiffs' expert testimony on damages, and for a directed verdict. There was evidence that Defendant had threatened doctors with litigation if they bought lasers from Plaintiffs after the lawsuit was filed, and Defendant contended on their website that they had exclusive right to sell the lasers even after the litigation had begun. Despite this evidence, Plaintiffs' interference with contract claim was dismissed and not submitted to the jury. The case settled on appeal after the filing of the opening brief. The judgment was accruing interest at a rate of 10 percent per annum. The case was mediated before Judge Alfred Chiantelli, retired, at ADR Services on June 8, 2011. FILING DATE: Filed in Texas on Dec. 10, 2009, the case was transferred to Alameda County Superior Court on Jan. 29, 2010.

Deliberation

two days

Length

three weeks