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$18.3 Million Awarded in Dispute Over Medical Device Laser Deal

DALLAS, April 4, 2017 /PRNewswire/ — An arbitration panel recently awarded $18.3 million to the bankruptcy estate of a Dallas company that claimed it was fraudulently lured into a licensing deal to sell a medical laser machine used by doctors.

The three-judge panel ruled 2-1 that Santa Barbara Medical Innovations, LLC, “supplied false information and made misrepresentations” when it struck a deal to sell substantially all of its assets to Primcogent Solutions, LLC, in 2011, including distribution rights for the Zerona laser, a device billed as a noninvasive alternative to liposuction.

The transaction ultimately caused Primcogent to file for Chapter 11 bankruptcy in 2013 to reorganize its business. It sued Santa Barbara Medical Innovations and Zerona’s manufacturer Erchonia Corporation, based in McKinney, Texas, the same year, claiming company officials were misled about the machine’s revenue-generating potential and the number of lasers on the market. A Dallas federal judge eventually compelled the parties to arbitration.

According to the arbitration panel’s findings, Santa Barbara Medical Innovations failed to disclose to Primcogent that customers had actually been returning the machines and that the deterioration of a contractual relationship with Groupon was negatively affecting customer relationships.

The Chapter 7 Trustee, John D. Spicer, was represented in the proceedings by attorneys Chris Hamilton, Meagan Martin and Kevin Colquitt of the Dallas law firm Hamilton Wingo, as special counsel appointed by the bankruptcy court. Prior to its Chapter 7 conversion, Primcogent Solutions was represented by Michelle Larson and Paul Silverstein of Andrews Kurth LLP.

“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,” Mr. Hamilton said. “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.”

Co-defendant Erchonia Corporation settled with the Chapter 7 Trustee on the morning of opening statements in the arbitration hearing.

Chris Hamilton is a trial lawyer who handles high-stakes contingency fee litigation for both plaintiffs and defendants.

For more information on the lawsuit, or general information requests please contact Jason Hartline at 214-234-7900 or jhartline@hamiltonwingo.com.