UPDATED Oct. 11, 2017, with comment from Alphatec.
NuVasive Inc. (NSDQ:NUVA) yesterday leveled a lawsuit against former CEO Patrick Miles, who jumped ship for Alphatec (NSDQ:ATEC) earlier this month, alleging that he enacted a year-long scheme to secretly back Alphatec while discouraging NuVasive from acquiring the smaller company.
The lawsuit, filed in the Delaware Chancery Court, claimed that after NuVasive was approached in January 2016 about a possible acquisition of Alphatec, Miles advised NuVasive that the deal was “a waste of time” due to Alphatec’s “aged, undifferentiated portfolio.” But by March 2017, the suit alleged, Miles had secretly bought up a stake in Alphatec and negotiated a deal to become that company’s chairman.
NuVasive also accused Miles of breaching his contract in taking the position with Alphatec, especially non-compete, non-solicitation and anti-poaching clauses. The company is seeking to compel Miles to return his compensation plus punitive damages.
“This step was not taken lightly, particularly given Mr. Miles’ history with NuVasive. Yet it is this history and Mr. Miles’ intimate knowledge of the company and our proprietary information that makes his breach of fiduciary duties and contractual obligations so egregious and this litigation necessary,” NuVasive said in a prepared statement. “It is not the company’s preference to proceed down a litigation path, but it would be contrary to our own responsibilities to ignore Mr. Miles’ actions. To be clear, Mr. Miles’ conduct has precipitated this lawsuit, which we believe is necessary to protect NuVasive’s rights and interests and the interests of our stakeholders. We will continue to take all appropriate steps in this regard.”
For its part, Alphatec, calling the complaint “baseless,” vowed to “vigorously support” Miles in the legal battle.
“The complaint is fictional, and includes disclosures by NuVasive that breach its contractual confidentiality obligations owed to Alphatec. It was filed by a law firm in violation of its own ethical obligations, as the firm is currently actively representing Alphatec in related matters,” the company said in a prepared statement.
“I was fortunate to be a part of NuVasive’s growth from zero dollars in sales to close to a billion dollars in revenue,” Miles said in prepared remarks. “I am exceptionally proud of my contribution, and I have lifelong friends who remain affiliated with the organization. I did not leave NuVasive to damage the company; in fact, I remain a significant shareholder. I chose to pursue a new opportunity at Alphatec because I want to align my talents and influence with a company that is focused on serving spine surgeons and their patients. The allegations made by NuVasive against me are clearly false and typical of a management team reacting to mass departures of key, spine-experienced executives. I intend, ultimately, to clear my name. In the meantime, I will not be distracted by baseless claims, and will drive Alphatec’s pursuit of improved surgical outcomes.”
“I have known Pat since I joined him in building NuVasive 12 years ago. He is well known to the spine industry worldwide and is highly respected for his integrity. The complaint against him is full of false claims and is nothing more than a PR stunt by NuVasive. It has been orchestrated to detract from a decaying, toxic culture that has contributed to the resignations of three C-suite officers since July 2017 and caused dozens of NuVasive employees and countless surgeon customers to reach out to Alphatec, seeking more attractive opportunities. The current issues at NuVasive have nothing to do with Pat. We look forward to continuing to move our business forward under his leadership,” added Alphatec CEO Terry Rich.