Buyers, sellers of medical device company win partial victories at COA

The Indiana Court of Appeals has affirmed the primary award of attorney fees and costs to the sellers of a medical equipment company after it fell into a dispute with its buyers. However, the appeals court reversed the award of treble damages and remanded for a recalculation of the sellers’ damages.

In 2011, Terri Symons, John Nauyokas, Jennifer Reynolds and David Dennison purchased Breath of Life Home Medical Equipment and Respiratory Services Inc. from sellers Gary and Jeremy Fish and other stakeholders. Disregarding language in the parties’ stock purchase agreement, the buyers did not obtain the release or replacement of the personal guaranties of the sellers and other shareholders to Integrated Medical Systems Inc., a vendor of medical equipment for the company.

As a result, the company defaulted on $800,000 in liabilities owed to IMS, prompting IMS to sue the sellers for recovery on their personal guaranties. IMS and the sellers came to a settlement agreement, and the sellers brought suit against the buyers of the company for breach of contract for failure to obtain the release or replacement of the sellers’ personal guaranties under Section 5.2 of the contract.

Under that section, the sellers sought a judgment for three times the amount of the alleged damages, including three times the attorney fees and costs. The Hamilton Superior Court denied the buyers’ motions for judgment on the pleadings, summary judgment and judgment on the evidence, as well as a motion to correct error, on that theory.

A jury then found for the sellers in the amount of $831,222, and the trial court awarded the sellers their reasonable costs and attorney fees, tripled under Section 5.2. It ultimately entered judgment against the buyers in the amount of $3,459,670.74 – almost 10 times the $350,000 purchase price for the company under the contract.

Though the Indiana Court of Appeals could not say the trial court abused its discretion in its determination of the principal amount of attorney fees and costs to the sellers, it partially reversed as to the award of treble damages in the case of Terri Symons, John Nauyokas, Jennifer Reynolds, and David Dennison v. Gary Fish and Jeremey Fish, 20A-PL-395, including the trebling of attorney fees and costs under Section 5.2. The appellate panel concluded a damages award greater than $250,000 was not supported by the evidence, the stipulated judgment or the indemnification clause as a matter of law.

“And neither would a damage award greater than $250,000 constitute an indemnification and reimbursement of actual losses incurred by the Sellers. Accordingly, neither the evidence nor the indemnification clause supports a judgment for the Sellers on their breach-of contract claim in an amount greater than $250,000, plus attorneys’ fees and costs. On both grounds, any judgment for a greater sum is contrary to law,” Judge Edward Najam wrote for the appellate court.

On the issue of whether Section 7.1 of the contract provided for an 18-month limitations period, the appellate court concluded the sellers’ complaint was not timed-barred.

“The plain language of Section 7.1 speaks to the Buyers’ obligations under the contract — those obligations that remained to be performed by Buyers within the first eighteen months after the closing,” Najam wrote. “That section does not shorten the time within which a complaint for breach of contract can be filed. … The trial court properly rejected each of Symons’ numerous motions to the contrary, and we affirm those decisions.”

On remand, the COA ordered the trial court to recalculate the Sellers’ damages, attorney fees, and costs.

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