InspireMD (NYSE:NSPR) logged a provisional win yesterday in a battle over nearly $3 million it allegedly owes in finder’s fees related to some $24 million in financing for the cardiac device maker.
Private equity shop Microbanc and managing member Todd Spenla sued InspireMD in May 2016, alleging that the company breached a contract stipulating a 9% finder’s fee for the $24 million InspireMD brought in in 3 rounds from 2010 to 2012.
The company and Microbanc inked a 6-month deal that ended in Nov. 2008; in the lawsuit, the PE firm alleged that another deal was made early the following December that was good through May 2010. Microbanc introduced InspireMD and Palladium on Dec. 16, 2009, leading to the trio of funding rounds and allegedly triggering a $2.6 million commission, according to documents filed in the U.S. District Court for Northern California.
The issue came to light in May 2010, when the private equity company hooked up a separate, $200,000 financing for InspireMD, which said a new commission agreement would need to be struck, according to the documents.
Yesterday Judge Joseph Spero agreed with InspireMD’s motion to dismiss, finding that Microbanc failed to state a claim but leaving the door open to an amended complaint.
“Because plaintiffs’ allegations of breach of the consulting agreement relate to events subsequent to the expiration of the stated term of the consulting agreement, they do not state a claim for breach of contract,” Spero wrote, noting that Microbanc also failed to show that InspireMD gave Microbanc written permission to approach investors, as their contract required.
“Because plaintiffs fail to allege the satisfaction of this condition precedent to their right to receive payment, [the lawsuit] does not state a claim for breach of the finders agreement,” the judge wrote.
“Plaintiffs’ opposition to the motion includes a request for leave to replead. The request will be granted to the extent that plaintiffs will be permitted to make a motion, accompanied by a proposed amended complaint, for leave to replead [breach of contract counts],” he wrote. “Any such motion must be filed by March 16, 2017, and be accompanied by a proposed amended complaint, a blackline comparison of the proposed amended complaint and the complaint, and a memorandum of law.”
The case will be dismissed with prejudice if Microbanc misses the deadline, Spero wrote.