For most companies, being ordered to pay $1 million as a result of a court order in a civil case would be bad news.

For Biomet Inc., receiving that word was, while somewhat disappointing, still welcome.

The decision by the U.S. Court of Appeals for the Third Circuit was handed down by a three- judge panel Wednesday. In it, the court affirmed the award of compensatory damages to Orthofix SRL for $48,875,397, plus interest, in a case Orthofix filed in 1995 against Biomet and its subsidiaries, Electro Biology and EBI Medical Systems Inc.

However, the decision also reduced the punitive damages assessed in federal district court from $50 million to $1 million.

In reaching the decision, the court noted, "... The damage inflicted on Orthofix was only economic and involved no harm to the public, and also the jury found that Orthofix itself breached the distributor agreement (with EBI), failed to fill and ship EBI's legitimate orders and engaged in tortious acts."

According to Greg Sasso, vice president of corporate development and communications at Biomet, the lawsuit resulted from Orthofix's refusal to renew EBI's distributor agreement and Biomet's need to maintain a reliable supplier relationship with its customers of orthopedic devices.

"Prior to Biomet buying EBI in 1988, they had a long-standing distribution agreement with Orthofix. We tried to extend that agreement in 1993, but it became clear through the negotiations they weren't going to agree to that extension," Sasso said. "During that time, we began developing our own external fixation device and were ready to distribute it when the negotiations with Orthofix failed to produce an extension."

Biomet president and chief executive officer, Dane Miller, maintains his company honored the spirit of the agreement it had with Orthofix, and only developed its own device when Orthofix was unwilling to extend the distributor agreement of EBI. He left open the possibility of further appeals of the compensatory damage award.

"We are disappointed by the Third Circuit's failure to grant relief from the jury award of compensatory damages. As a result of Orthofix's decision not to renew the agreement, Biomet was forced to design its own device, and we believe we were ultimately successful in the market because we developed a superior product coupled with unparalleled service, not because we did anything wrong," Miller said. "While we're considering further legal challenges, we will not allow this matter to distract us and will continue to focus our attention on delivering superior medical products and developing new technologies for better orthopedic patient care."

The total of $55 million in compensatory damages due to Orthofix is being held in escrow and consists of cash and marketable securities from EBI and Biomet.

Orthofix Group chairman Robert Gaines Cooper said his firm, while disappointed by the reduction in punitive damages, feels vindicated by the compensatory damages being upheld.

"I'm gratified that a total of three appellant judges, as well as the trial judge and eight jurors, agreed that EBI violated its contracts with us and wrongfully interfered in our cherished and long-standing relationships with orthopedic surgeons and hospitals in the United States," Cooper said. "Although the majority's reduction of the punitive damages award is obviously disappointing, the panel's unanimous decision to find EBI liable and to uphold the entire $48 million award in compensatory damages vindicated Orthofix's claims and would provide substantial compensation to our company." [[In-content Ad]]