Biolitec CEO Skips U.S. Court Battle After Barred Merger

Jan 15, 2014 1:38 pm ET

(Updates with case in first paragraph.)

Jan. 15 (Bloomberg) -- German medical laser maker Biolitec AG and its CEO were sanctioned by a U.S. judge for failing to show up in a lawsuit by an American distributor involving patent infringement, contract claims and a merger allegedly aimed at avoiding a $16.5 million judgment.

The distributor, AngioDynamics Inc., claimed Biolitec diverted assets via the merger with an Austrian unit to avoid the judgment imposed by a New York federal court, according to court papers. U.S. District Judge Michael Ponsor in Boston yesterday -- who had explicitly barred the merger -- said satisfying the judgment was now “virtually impossible.”

Ponsor penalized the company and Chief Executive Officer Wolfgang Neuberger for refusing to travel to Boston to answer questions by AngioDynamics lawyers. Neuberger didn’t come to the U.S. because he feared a contempt citation for pushing through the merger over the judge’s ruling, Ponsor said. The CEO can’t use Biolitec’s failure to comply with the order barring the merger as an excuse to avoid the deposition, he said.

“At the end of this long road of blatant misconduct, there is only one terminus: entry of judgment by default,” the judge wrote.

Biolitec was accused in the underlying lawsuit in New York of failing to indemnify Latham, New York-based AngioDynamics for patent-infringement claims over products the German company made and AngioDynamics sold.

AngioDynamics subsequently sued in Boston federal court, claiming Biolitec diverted assets to avoid paying the judgment, according to Ponsor.

Austrian Merger

Biolitec merged with its Austrian unit on March 15, the company said in a statement last year. In April, the court found Biolitec in contempt for failing to comply with a directive not to merge and sought an arrest warrant for Neuberger.

Jena-based Biolitec has since refused to make Neuberger and other witnesses available for depositions by lawyers for AngioDynamics, the judge said yesterday.

Neuberger is “outside the physical grasp of the court and therefore in a position to defy its orders.” If the CEO were in the U.S., “he would have long ago been taken into custody,” the judge said.

Biolitec has made it “crystal clear” that it doesn’t intend to comply with the court’s order blocking the merger, and repeated its refusal “to produce defendant Neuberger and confirmed their unwillingness to pay the assessed fines,” Ponsor wrote.

‘No Justification’

Biolitec and Neuberger are disappointed by the decision and are “confident that it will be vacated or reversed,” Edward Griffith, a lawyer for the company, said in an e-mailed statement. Biolitec complied with all obligations concerning exchanges of information and making witnesses available, Griffith said.

“The decision is especially inappropriate because the district court never previously sanctioned defendants for” violations of discovery, or the exchange of information between parties before trial, the lawyer said.

Ponsor set a Jan. 31 deadline for AngioDynamics to file a damages claim against Biolitec. Janine McCargo, a spokeswoman for AngioDynamics, declined to immediately comment.

The U.S. case is AngioDynamics Inc. v. Biolitec AG, 09-30181, U.S. District Court, District of Massachusetts (Boston).

--With assistance from Karen Gullo in San Francisco. Editors: Peter Blumberg, Andrew Dunn