Cybex post-trial motions don’t convince judge to change $66 million verdict; appeal process starts as business continues

Cybex is preparing its appeal of the $66 million jury verdict against it in a product liability lawsuit after the judge denied post-trial motions to have it reduced. SNEWS finds out the case’s status, progress and future.
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Cybex is preparing its appeal of the $66 million jury verdict against it in a product liability lawsuit.

The appeal of the Dec. 7, 2010, ruling should be formally filed with the appellate division of the Supreme Court of the State of New York in 30 days or less, COO Art Hicks told SNEWS®. The process began after the case’s original judge, Diane Devlin, also of the New York State Supreme Court, denied February post-trial motions by Cybex (Nasdaq: CYBI) asking to have the verdict reduced.

“I believe it is an outrageous litigation,” CEO John Aglialoro told investors and media on a quarterly financial call on April 7. “It is an unacceptable reality that has occurred.

“We are going to pursue it in the appellate court,” Aglialoro added, calling the case “senseless, worthless.”

“It may prove to be expensive, but we’ll get through it,” he said.

The case involved physical therapy assistant Natalie Barnhard (www.nataliebarnhard.com), an employee of Amherst Orthopedic Physical Therapy in New York. Barnhard became a quadriplegic after she allegedly pulled over on herself a Cybex weight machine -- the Eagle Leg Extension made since 1983. Barnhard vs. Cybex was filed in 2005, about five months after the late 2004 accident.

As a part of the process, Cybex will secure a bond of an as-yet-undetermined amount to demonstrate to the plaintiff and the court that the company has money for the case and to protect itself from the plaintiff trying to collect money through other methods such as liens, Hicks explained.

In the next two weeks, Cybex will determine in negotiations what amount of bond the court will accept, and then that money is secured as a form of collateral and sits untouched.

“Obviously we don’t have $66 million sitting around doing nothing,” Hicks said. “We have to make a request for a lower number.

On the April 7 call, he noted, “It’s up to the appellate court to come up with an amount, and it’s subjective.”

On March 31, Cybex officials said they preliminarly set aside $46 million in the fourth quarter for the lawsuit. The reserve, along with tax provision of $12.7 million related to the case, led to big fourth-quarter loss of $57.1 million, despite a strong 15 percent rise in revenue. Click here to see a March 31 SNEWS story about the Cybex earnings release.

Meanwhile the company has received a delisting notice from NASDAQ, a formality when a company’s stock drops below $1 for 30 consecutive days. However, an exchange does not act for at least six months. Click here to see a Jan. 28, 2011, story about the delisting and the process. And Cybex's stock has recovered some with the recent strong revenue figure -- nearing that $1 stock-price threshold at $0.97 as of the market's close on April 8.

Once the appeal is filed in the case of the $66 million verdict against the company, a ruling could take at least six months and as long as a year, Hicks told SNEWS he has been told, as a panel of judges reviews the case and accepts presentations from both sides.

“The percentages are in our favor,” Hicks said. But, he added, the company is “in untested waters” with a verdict this size.

Judges are known to substantially reduce some huge jury verdicts like this one, according to legal experts. According to the plaintiff’s attorney in a December 2010 statement, the award is believed to be the largest of its kind in the history of Erie County, where the incident occurred in Buffalo, New York. Others have noted it is among the largest nationally.



Aglialoro expressed his sentiments of “injustice” in a post-verdict letter to investors and customers in December 2010. Click here to see that story.

On the April 7 call, Aglialoro noted the company is branching out even more beyond clubs to military, university, police and other facilities. In addition, it has increased its marketing budget as sales and revenues have increased so it can get the word out about its safe products.

“There’s a great spirit of optimism here," Aglialoro added.

Still, the case could cost the company about $100,000 per quarter to pursue, Hicks told analysts on the April 7 call. But the company remains positive.

“Typically,” Hicks said on the call, “these types of cases get settled or get thrown out.”

--Therese Iknoian

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