Business Fraud Lawsuit: Judge Awards Plaintiffs’ Attorneys Fees of $1,745,740 in Verdict Against Healthtronics, Inc.

“. . . ‘Thou doth protest too much’ when considering the litigation history here which has largely been occasioned by the moves of defense counsel as to choice of forum and procedural issue put in play.” –Robert McGuiness Alameda County Superior Court Judge

On November 4, 2011 a Alameda County jury awarded plaintiff Peter Allen, owner of Allmed Systems, Inc. in Pleasanton, California, $9,263,345 for breach of contract and intentional and negligent misrepresentation. The case, Allmed Systems, Inc. dba LISA LASER USA and LISA LASER OHG v. Healthtronics, Inc., was one of the largest verdicts in the history of Gwilliam, Ivary, Chiosso, Cavalli, & Brewer. In an update to this verdict, our firm went back to court seeking reimbursement for attorney’s fees which Plaintiffs were entitled to per contractual agreement as the prevailing party in the litigation.

Judge Awards Plaintiffs’ Attorneys Fees of $1,745,740 Against Healthtronics, Inc.

Alameda County Superior Court Judge Robert McGuiness awarded Plaintiffs’ attorneys fees of $1,745,740 in the final verdict. This makes the final judgment $11,009,090. In addition, the judge further awarded interest at a rate of 10% annum from the date the verdict was entered on November 4, 2011. As of February 4, 2012 the verdict is worth $11,284,312. The final count:

Plaintiffs’ Attorneys Fees: $1,745,740
Final Judgment: $11,009,090
Interest Award: 10% annum from verdict date November 4, 2011

History of Events: A Retrospective

Plaintiff, a small corporation and distributor of medical products, sued a multi-national corporation. The defendant corporation had an exclusive distribution arrangement to market plaintiff’s surgical laser. Plaintiff contended that rather than using its best efforts to market the laser to the entire medical community, the defendant corporation tried to maximize their own profits by entering into partnerships directly with urologists and refusing to sell it outside those partnerships. The jury found that defendant breached the contract with plaintiff and made intentional and negligent misrepresentations to plaintiff.

The plaintiff contended that the 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. (There were no fly zones where they did not sell.) They did not give plaintiff rolling forecasts for the sale and distribution of the laser.

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

2008 Allmed Executed a Cure Provision in the Contract

In September and November of 2008, the plaintiffs executed a cure provision in the contract indicating they would withdraw from the contract under their terms because of defendant’s breach. Correspondence between the attorneys in late September and November of 2008 disputed the anticipatory breach. However, while negotiations were pending, the defendant sued Peter Allen and his company in Texas. Plaintiffs contend this was in violation of the provisions of the contract which stipulated that any litigation on the contact 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. The defendants then removed to the federal court and it was remanded back. The plaintiffs contended that the jury should know of these facts of the Texas lawsuit because of the contention for punitive damages. However, the court excluded that evidence from the jury. Plaintiffs contend that the evidence can still be important to show their bad faith litigation under their contention for pre-judgment interest.

Plaintiffs also contended that the defendants are liable for the tort of interference with a business relationship. However, the Court entered a directed verdict on that cause of action and against the plaintiffs and it did not go to the jury. However, there was evidence that the defendants has threatened other doctors with litigation if they bought lasers from the plaintiffs after the lawsuit was filed and further that they contended by their website and otherwise that they had exclusive right to sell the lasers even after the litigation had begun.

Defendants strongly disputed plaintiffs’ contentions 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 contended the Plaintiffs breached the contract by promoting a new advanced laser product in violation of the exclusive distribution contract. They had a cross-complaint against the Plaintiff.