Ev3 Inc.'s acquisition of Appriva Medical Inc. in 2002 was supposed to herald a triumph for Appriva and a big payday for its shareholders. Instead, it kicked off a long and bitter legal battle. The shareholders sued, claiming that Ev3 went out of its way to avoid paying $175 million in so-called "milestone payments" in the years after the deal. Ev3 countered that it had no obligation to pay up, because Appriva's headline medical device didn't reach the milestones in question.
A state court jury in Delaware sided forcefully with Appriva's former shareholders on Wednesday, reaching a $175 million verdict that could be worth as much as $265 million with tacked-on interest. More than a decade after the ill-fated deal with Appriva was struck, the jury found that Ev3 breached a contractual duty to make a good faith effort to reach the payment milestones.
The ruling is a win for Eric Leon, Joe Serino, Jay Lefkowitz, and John Del Monaco at Kirkland & Ellis. The law firms Duane Morris and Oppenheimer Wolff & Donnelly represented Ev3, now owned by the medical device company Covidien plc.
In the 1990s, Appriva developed PLAATO, a cutting-edge heart implant for reducing the risk of strokes. Based on PLAATO's promise, Ev3 entered talks to buy Appriva in 2002. The parties eventually arrived at a deal in which Ev3 paid just $50 million up front, plus $175 million down the road if PLAATO hit four milestones related to regulatory approvals. The contract contained a provision stating that Ev3 had to act in good faith.
Under Ev3's leadership, PLAATO became a commercially viable product, but it never quite reached the four milestones by the deadlines Appriva and Ev3 had set. Appriva's early shareholders, including PLAATO's lead inventor, brought suit in 2005 in Delaware Superior Court, alleging fraudulent inducement and breach of contract.
The first four years of the case were consumed by procedural skirmishes. Once Appriva's shareholders were cleared to bring their case in 2009, they brought on Leon of Kirkland & Ellis. Their original lawyers at Goodin, MacBride, Squeri, Day & Lamprey remained involved in the case, along with local counsel at Morris Nichols Arsht & Tunnell.
After a nine-day trial, jurors sided with Kirkland on the breach of contract claim, awarding the shareholder plaintiffs every penny they claimed to have lost in missed milestone payments, plus interest.
Matthew Taylor of Duane Morris, who represented Ev3, was not immediately available for comment.
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