PR Newswire10.11.17
NuVasive Inc., a medical device company focused on transforming spine surgery with minimally disruptive, procedurally-integrated solutions, announced that it has filed a lawsuit in the Delaware Chancery Court against Patrick S. Miles, former vice chairman of the company and a member of NuVasive's Board of Directors. The lawsuit asserts that before abruptly resigning from the company to join Alphatec Holdings Inc., Miles engaged in a scheme for over a year to divert corporate opportunities and then announced he would join Alphatec in violation of his contractual obligations to NuVasive. In the lawsuit, NuVasive argues Miles' divided loyalties constituted a clear breach of his fiduciary duties to NuVasive and its stakeholders, and that he violated his non-competition and non-solicitation obligations to the company.
NuVasive issued the following statement:
This step was not taken lightly, particularly given Miles' history with NuVasive. Yet it is this history and Miles' intimate knowledge of the company and our proprietary information that makes his breach of fiduciary duties and contractual obligations so egregious and this litigation necessary.
It is not the company's preference to proceed down a litigation path, but it would be contrary to our own responsibilities to ignore Miles' actions. To be clear, Miles' conduct has precipitated this lawsuit, which we believe is necessary to protect NuVasive's rights and interests and the interests of our stakeholders. We will continue to take all appropriate steps in this regard.
As detailed in the complaint:
In January 2016, NuVasive was contacted by UBS Financial Services Inc. to explore NuVasive's interest in acquiring Alphatec. Miles was NuVasive's president and chief operating officer at the time. Miles advised NuVasive that pursuing such acquisition was "a waste of time," and that Alphatec had an "aged, undifferentiated portfolio." Consistent with Miles' comments, NuVasive passed on the opportunity.
Then, on March 22, 2017, Miles secretly executed a securities purchase agreement to purchase $500,000 of Alphatec stock in a private placement. Miles and Alphatec concealed this investment by purchasing shares in Alphatec through an entity called "MOM" and failing to disclose that Miles was the beneficial owner of the shares. While still an employee and a member of the NuVasive Board, Miles negotiated an offer from Alphatec to serve as its executive chairman. As part of that offer, as an inducement to his employment, Alphatec granted Miles 1,000,000 Restricted Stock Units (a market value of $3,220,000 at Alphatec's closing price as of October 2, 2017). Miles also agreed to purchase 1.3 million shares at $2.26 per share (a $2,938,000 investment) and is to be granted warrants to purchase up to an additional 1.3 million shares of Alphatec stock upon the closing of his purchase. Miles will own about 15 percent of the outstanding shares of Alphatec's stock and, with the warrants he has been granted, could potentially own up to 23 percent of Alphatec's outstanding stock.
On Sunday, October 1, 2017, Miles notified NuVasive that he was resigning his position as vice chairman and a member of the Board effective immediately. He planned to commence employment as Alphatec's executive chairman the next day, and he did not intend to honor his contractual commitments to refrain from: 1) working for a competitor, 2) soliciting NuVasive's customers and 3) recruiting NuVasive's employees.
A full copy of the complaint will be available at NuVasive's website.
NuVasive stated it is continuing to investigate and will file further claims if warranted.
DLA Piper is serving as legal counsel to NuVasive in connection with this matter.
NuVasive issued the following statement:
This step was not taken lightly, particularly given Miles' history with NuVasive. Yet it is this history and Miles' intimate knowledge of the company and our proprietary information that makes his breach of fiduciary duties and contractual obligations so egregious and this litigation necessary.
It is not the company's preference to proceed down a litigation path, but it would be contrary to our own responsibilities to ignore Miles' actions. To be clear, Miles' conduct has precipitated this lawsuit, which we believe is necessary to protect NuVasive's rights and interests and the interests of our stakeholders. We will continue to take all appropriate steps in this regard.
As detailed in the complaint:
In January 2016, NuVasive was contacted by UBS Financial Services Inc. to explore NuVasive's interest in acquiring Alphatec. Miles was NuVasive's president and chief operating officer at the time. Miles advised NuVasive that pursuing such acquisition was "a waste of time," and that Alphatec had an "aged, undifferentiated portfolio." Consistent with Miles' comments, NuVasive passed on the opportunity.
Then, on March 22, 2017, Miles secretly executed a securities purchase agreement to purchase $500,000 of Alphatec stock in a private placement. Miles and Alphatec concealed this investment by purchasing shares in Alphatec through an entity called "MOM" and failing to disclose that Miles was the beneficial owner of the shares. While still an employee and a member of the NuVasive Board, Miles negotiated an offer from Alphatec to serve as its executive chairman. As part of that offer, as an inducement to his employment, Alphatec granted Miles 1,000,000 Restricted Stock Units (a market value of $3,220,000 at Alphatec's closing price as of October 2, 2017). Miles also agreed to purchase 1.3 million shares at $2.26 per share (a $2,938,000 investment) and is to be granted warrants to purchase up to an additional 1.3 million shares of Alphatec stock upon the closing of his purchase. Miles will own about 15 percent of the outstanding shares of Alphatec's stock and, with the warrants he has been granted, could potentially own up to 23 percent of Alphatec's outstanding stock.
On Sunday, October 1, 2017, Miles notified NuVasive that he was resigning his position as vice chairman and a member of the Board effective immediately. He planned to commence employment as Alphatec's executive chairman the next day, and he did not intend to honor his contractual commitments to refrain from: 1) working for a competitor, 2) soliciting NuVasive's customers and 3) recruiting NuVasive's employees.
A full copy of the complaint will be available at NuVasive's website.
NuVasive stated it is continuing to investigate and will file further claims if warranted.
DLA Piper is serving as legal counsel to NuVasive in connection with this matter.