California Verdicts

Plaintiff(s):

OrthoTec LLC

Plaintiff Attorney(s):

Peter W. Ross;
Browne George Ross LLP;
Los Angeles,
CA,
for
OrthoTec LLC ■ Benjamin D. Scheibe;
Browne George Ross LLP;
Los Angeles,
CA,
for
OrthoTec LLC

Defendant(s):

Guy Viart, 

John Foster, 

Alain Tornier, 

Olivier Carli, 

Scient’x S.A., 

Surgiview S.A.S., 

Jeffrey A. Rosenfeld, 

Healthpoint Capital LLC, 

Mortimer Berkowitz, III, 

Healthpoint Capital Partners L.P., 

Healthpoint Capital Partners II LP

Defense Attorney(s):

Brad D. Brian;
Munger, Tolles & Olson, LLP;
Los Angeles,
CA,
for
Guy Viart, John Foster, Alain Tornier, Olivier Carli, Scient’x S.A., Surgiview S.A.S., Jeffrey A. Rosenfeld, Healthpoint Capital LLC, Mortimer Berkowitz, III, Healthpoint Capital Partners L.P., Healthpoint Capital Partners II LP

In 2004, plaintiff OrthoTec, LLC, a California-based supplier of medical devices, obtained a judgment against Eurosurgical, a French company, for $8.93 million in regard to a breach-of-contract claim filed in Los Angeles County Superior Court. OrthoTec also sued Eurosurgical in the Central District of California for trademark and copyright infringement, in which the district court entered judgment in OrthoTec’s favor for $30,445,683 in 2007. OrthoTec was initially granted the exclusive right to market Eurosurgical’s surgical devices in the United States. After OrthoTec successfully created a flourishing United States market for Eurosurgical’s products, Eurosurgical claimed that OrthoTec breached the contract, purported to terminate the contract, and sought to take for itself the United States territory OrthoTec had allegedly built. As a result, Orthotec brought a breach-of-contract suit against Eurosurgical in Los Angeles Superior Court, and a trademark-and-copyright-infringement suit against Eurosurgical in the Central District of California. The two matters resulted in judgments of $8.93 million and $30,445,683, respectively. OrthoTec claimed that although Eurosurgical could have paid the judgments, it, instead, sought to evade the judgments through a series of corporate machinations. One month after the first judgment, Eurosurgical leased its entire business to its own subsidiary, Surgiview S.A.S. OrthoTec claimed Eurosurgical did so specifically to avoid the California state court judgment. OrthoTec also claimed that in May 2006, in the face of the impending federal court judgment, Eurosurgical sold all of its assets — but not its liabilities — to Surgiview allegedly for a tiny fraction of their fair market value. At the direction of New York hedge funds and their managers, Surgiview was then acquired by Scient’x S.A., and the combined Eurosurgical/Surgiview/Scient’x entity was offered to the public in an initial public offering that allegedly valued the combined entity at a valuation far higher than the value at which Scient’x had acquired the Surgiview/Eurosurgical assets. Scient’x, itself, was later acquired by Alphatec Holdings Inc., again at a valuation allegedly far higher than what had been placed on the Eurosurgical assets in the previous transactions. After the transfers, judgment debtor Eurosurgical declared bankruptcy without paying any portion of the judgments rendered in favor of OrthoTec. Accordingly, in 2008, OrthoTec sued Surgiview, Scient’x, and the other individual and corporate entities allegedly involved in orchestrating the transactions. (OrthoTec filed suit both in California and in New York, where the hedge funds and their managers resided.) Plaintiff’s counsel argued that the defendants’ actions constituted fraudulent transfers in violation of the Uniform Fraudulent Transfers Act, tortious interference with the judgments, and tortious interference with OrthoTec’s sale of its rights to the Eurosurgical line of products to a third party. Counsel contended that as a result OrthoTec suffered $11 million in additional damages. Defense counsel argued that the transfers were for equivalent value and that the transfers could not be considered fraudulent because they were approved by the Commercial Court of Arras. In response, plaintiff’s counsel contended that the Commercial Court of Arras was a business court that has no equivalent in the U.S. system and that the stated court is overseen by businessmen judges, rather than trained attorney judges, in a proceeding held without OrthoTec’s knowledge or participation.

OrthoTec sought recovery of damages for the fraudulent transfers and interference with its prospective economic relations.

The jury found that Eurosurgical was liable for actual fraudulent transfer and constructive fraudulent transfer. Thus, the jury determined that OrthoTec’s damages totaled $47,895,000, which included $37.12 million for Eurosurgical’s fraudulent transfer, and $10,775,000 for Surgiview’s intentional or negligent interference with OrthoTec’s prospective economic relations with Eurosurgical. OrthoTec was also awarded prejudgment interest against Surgiview.

Actual Award:

$49,000,000

Judge:

Joseph A. Kalin

Post Trial:

Prior to a judgment being entered against Surgiview, a subsidiary of Alphatec Holdings Inc., a second trial was scheduled to determine if Alphatec could be held responsible for the amount of the damages assessed against Surgiview. Prior to this trial, Surgiview and Alphatec agreed to settle with OrthoTec for $49 million.

This report is based on information that was provided by plaintiff’s counsel. Defense counsel did not respond to the reporter’s phone calls.