An arbitration panel awarded Dallas-based Primcogent Solutions $18.3 million after it found that Santa Barbara Medical Innovations “supplied false information and made misrepresentations” when the 2 companies struck a deal over a medical laser machine.
In 2011, Santa Barbara Medical Innovations sold Primcogent distribution rights for the Zerona laser, which was billed as a noninvasive alternative to liposuction. But 2 years later, Primcogent was forced to file for Chapter 11 backruptcy to reorganize its business.
The company sued Santa Barbara Medical Innovations and the machine’s manufacturer Erchonia Corp., alleging that they were misled about the laser machine’s revenue-generating potential and the number of lasers on the market.
A federal judge in Dallas eventually persuaded the companies to pursue arbitration.
The arbitration panel found that Santa Barbara Medical Innovations failed to disclose to Primcogent that customers were returning the machines and that a contractual relationship with Groupon was deteriorating and negatively impacting customer relationships.
“We are grateful that the entire panel of arbitrators paid such serious and close attention to the law and the evidence, in finding that Primcogent would not have entered into the deal if the true legal and financial picture had been properly disclosed,” attorney Chris Hamilton said in prepared remarks. “This was a classic case of negligent misrepresentation to induce a transaction. This award will provide a strong measure of justice to the financial victims and creditors.”