Facts

Plaintiffs Allmed Systems Inc., a small corporation and distributor of medical products, and Lisa Laser OHG (Lisa OHG), a German corporation that manufactures surgical lasers, sued corporation defendant HealthTronics Inc. HealthTronics had an exclusive distribution arrangement to market Lisa OHG's surgical laser. Allmed and LISA OHG contended that rather than use its best efforts to market the Revolix laser to the entire medical community, Healthtronics maximized its own profits by entering into partnerships directly with urologists groups and by refusing to sell the Revolix laser outside its partnerships.

In September 2008, Allmed and Lisa OHG sent notice of default and opportunity to cure pursuant to the contract. Correspondence between the attorneys in late September and November 2008 disputed the anticipatory breach. HealthTronics then sued Peter Allen and his company in Texas. Allmed claimed that this was in violation of the provision of the contract, which stipulated that any litigation on the contract needed to be in Alameda Superior Court in State of California. HealthTronics claimed that the forum selection clause specified that particular types of disputes were to be litigated in California. The case was litigated for a year and a half in Texas; the Texas trial court and intermediate court of appeals ruled in HealthTronics favor, concluding that the issues in dispute were outside the scope of the forum selection clause.

Allmed and Lisa OHG filed the instant lawsuit in California in December 2009. HealthTronics then removed the case to the Northern District of California. In May 2010, the Texas Supreme Court ordered the matter back to Alameda Superior Court. HealthTronics agreed to voluntarily remand the case to California state court after the ruling.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that HealthTronics breached the contract by refusing to use their best good faith efforts and breached other parts of the contract by not selling the product throughout the United States. Plaintiffs contended that HealthTronics did not give Allmed rolling forecasts for the sale and distribution of the laser.

Plaintiffs also contended that HealthTronics lied about their intent to sell the product to urologists outside the partnerships that they represented (approximately one-third of the urologists in the United States) and that HealthTronics never intended to distribute the laser to anyone other than their own partners. Plaintiffs contended that this stifled the Revolix laser in the marketplace, since HealthTronics was the exclusive distributor.

Plaintiffs alleged that HealthTronics was liable for the tort of interference with a business relationship. However, the court entered a directed verdict on that cause of action and against Allmed and it did not go to the jury. Plaintiffs contended that there was evidence that HealthTronics had threatened other doctors with litigation if they bought lasers from Allmed after the lawsuit was filed. Further, plaintiffs contended that HealthTronics claimed that they had exclusive right to sell the lasers even after the litigation had begun.

DEFENDANT'S CONTENTIONS:
HealthTronics disputed plaintiffs' contentions and contended 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 that plaintiffs breached the contract by promoting a new advanced laser product in violation of the exclusive distribution contract. HealthTronics cross-complained against Allmed and Lisa OHG.

Settlement Discussions

Allmed and Lisa OHG demanded $6 million. HealthTronics offered $1.25 million.

Result

$9,263,345 (intentional misrepresentation and breach contract) Defense verdict on HealthTronics' cross-complaint. Defense verdict for punitive damages. The jury found that HealthTronics breached the contract with Allmed and Lisa OHG and made intentional and negligent misrepresentations to Allmed and Lisa OHG. As of February 4, 2012, the verdict is worth $11,284,312.13. Plaintiffs' attorney fees were awarded in the amount of $1,745,740. The judge further awarded interest at a rate of 10% per annum from the date the verdict was entered on November 4, 2011.

Other Information

Settlement conference was held before Judge Paul Fogel on July 18, 2011. The case was mediated before Judge Alfred Chiantelli, retired, at ADR Services on June 8, 2011. FILING DATE: The case was filed on Dec. 12, 2008 in Texas. Plaintiffs filed the instant lawsuit in the Alameda Superior Court on December 10, 2009.

Deliberation

two days

Poll

10-2

Length

three weeks