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Jury hits Alphatec with $48M damages award in OrthoTec spat

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Jury hits Alphatec with $48M damages award in OrthoTec spat

Alphatec (NSDQ:ATEC) said it’s on the hook for nearly $48 million after a California state jury found that 1 of its subsidiaries undervalued assets during an acquisition in Europe.

The jury in the California Superior Court in Los Angeles decided that Alphatec’s Surgiview unit transferred assets for less than fair market value and "interfered with certain contractual rights of OrthoTec" when it bought Eurosurgical in May 2006, according to a press release. Alphatec acquired Surgiview in 2010.

The jury awarded damages of $47.9 million, plus interest, but formal judgment has yet to be entered pending a 2nd trial to determine whether Alphatec can be found responsible for the damages award, according to the release.

OrthoTec sued bankrupt Eurosurgical in 2008, accusing it of fraudulently transferring assets to Surgiview to avoid paying $39 million in contract and copyright damages OrthoTec won in previous breach-of-contract and copyright infringement lawsuits. OrthoTec in 1998 bought the exclusive U.S. rights to Eurosurgical’s devices for 18 months, according to court documents. The arrangement was so successful that Eurosurgical sought to spike the deal and entered the U.S. market on its own, OrthoTec alleged.

But Eurosurgical allegedly sought to escape the $39 million by 1st leasing its entire business to Surgiview in 2004 and then transferring all but it damages liability to Surgiview 2 years later, OrthoTec alleged. Alphatec was added to the case in 2012, 2 years after it bought Surgiview.

Alphatec said it expects the decision to result in a $47.9 million charge to its 4th-quarter books, plus $3.7 million in legal costs.

"While Alphatec is disappointed with the outcome, we continue to believe that the facts and the law do not support the jury’s findings and Alphatec will vigorously defend itself in any future litigation related to this matter," chairman & CEO Les Cross said in prepared remarks. "Moving forward, Surgiview will file appropriate legal motions."

Last September Alphatec announced plans to cut 76 positions from Surgiview and Scient’x in a move aimed at saving between $2 million and $6 million a year.

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