Blackstone Florida Whistleblower Lawsuit Dismissed

We reported on August 13, 2012 that a whistleblower lawsuit against Blackstone Medical, Inc. had been unsealed in a U.S. District Court in Florida on August 8, 2012.

We have learned that the lawsuit was dismissed by U.S. District Judge James Moody in Tampa on August 15, 2012. The case was dismissed without prejudice, all pending motions were denied as moot and the clerk was directed to close the case. Our August 13 story also appeared in our weekly email version of our publication on August 21, 2012 after the dismissal took place.

The Order of Dismissal was in response to the Relator’s (Jon Schiff, the Whistleblower) Request for Voluntary Dismissal Without Prejudice. Such a request means that Schiff retains his right to come back before the Court at a future time.

Orthofix and Former Blackstone Owners Reach Settlement

We reported erroneously that Orthofix International N.V. had until September 22, 2012 to access a $50 million escrow account established when Orthofix acquired Blackstone in 2006. The former owners of Blackstone had agreed to indemnify Orthofix for “breaches of representations and warranties” under the sales agreement.

According to Orthofix’s latest 10-Q filed with SEC on July 30, 2012, the company reached an agreement with the representative of the former shareholders of Blackstone in February 2012 resolving all outstanding escrow and indemnification claims under the Blackstone Merger Agreement. Under the agreement, approximately $42.5 million was distributed from the escrow fund to the company (which will be used, among other things, to fund the $32 million settlement in principle Orthofix has with the government regarding Blackstone).