Cybex officials said they are analyzing numerous financial and legal options after a New York appeals court reduced, but upheld an unfavorable verdict for the fitness equipment company in an ongoing legal case.
On a Nov. 22 conference call, Cybex President Art Hicks said the company’s “first priority” is to appeal within the next few days the latest ruling in the personal injury and product liability lawsuit. It expects the court’s decision within 60 days on whether it will consider the appeal. If the appeal is heard, the ruling could be affirmed, further reduced, or sent to a retrial, Hicks said.
Hicks declined to comment whether the company would seek a settlement in the case, although later he said, “it’s a possibility.”
On Nov. 18, 2011, the Appellate Division, Fourth Judicial Department, of the Supreme Court of the State of New York, reduced a near $66 million jury verdict faced by Cybex to $44 million. Cybex officials annouced the ruling Nov. 21.
Cybex is responsible for payment of the $44 million, but will seek reimbursement of approximately $11 million from its co-defendant in the case, Amherst Orthopedic Physical Therapy, resulting in a $33 million modified judgment. That includes $2 million in coverage from Cybex’s insurance policy at the time of the accident, Hicks said. He added that Amherst is covered by the New York State Workers Compensation Fund, which is expected to come through with the payment.
In December 2010, a New York Supreme Court case ruled the parties responsible for an accident and major injury in 2004 in which Natalie Barnhard allegedly pulled over on herself a Cybex weight machine at Amherst Orthopedic Physical Therapy in New York, where she was employed. Cybex officials have maintained that Barnhard improperly used the machine and the company was not at fault.
Hicks said he could not speculate at this time if the company could continue operations if it had to pay the $33 million.
“We’re still analyzing what the impact might be,” he said. “The good news is that the underlying business is strong,” and, he added, the company’s financers “have been strong supporters. We are looking at several financing options … but nothing is final.”
In the fourth quarter 2010, Cybex set aside $46 million, plus $12.7 million in tax provisions, related to the case.
Cybex (Nasdaq:CYBI) also faces two delisting reviews by the Nasdaq market for failing to maintain $10 million in equity and keep its share price above $1 per share. The company has extensions to meet each of the requirements through early January 2012 and late March 2012, respectively, Hicks said.
Attorneys for Barnhard, who is now a quadriplegic from the accident, said in a statement that even with the reduction, the amount “recognizes the harm” to their client.
“Regretfully, most of the money is going to be needed for her 24-hour-a-day care for the rest of her life,” the attorneys at Phillips Lytle LLP said on Barnhard's behalf. They argued that Cybex “sold a defectively designed and unstable product and failed to give adequate warnings and instructions in that it issued conflicting instructions regarding the installation and anchoring requirements for this machine.”
-- David Clucas