This article has been corrected to clarify that although Thermo Fisher Scientific purchased NovaWave Technologies, it does not operate as a subsidiary of the firm.
NEW YORK (GenomeWeb News) – The CEO of a Thermo Fisher Scientific business is suing the company, alleging Thermo Fisher cheated him and other former shareholders millions of dollars in earn-out payments.
The lawsuit, filed in US District Court for the District of Delaware last week, stems from Thermo Fisher's buy of NovaWave Technologies in early 2010. In the complaint, plaintiff James Scherer, the President and CEO of NovaWave, claims that the litigation "arises out of Thermo Fisher's unlawful, fraudulent, and bad faith scheme to deprive NovaWave's former shareholders of millions of dollars in earn-out payments due" under the 2010 merger agreement.
NovaWave develops advanced chemical sensors for environmental monitoring, industrial and safety applications.
The financial terms of the deal were not disclosed at the time of the transaction, but according to the complaint, Thermo Fisher made a base payment of $21 million to NovaWave's former shareholders as part of the deal.
The deal also provided NovaWave's shareholders payments of up to $4 million based on the company hitting certain revenue targets, and earn-out payments of up to $1 million based on the commercialization of certain products.
Scherer, who is acting as the shareholders representative in the lawsuit, alleges that Thermo Fisher, however, "did not comply with its contractual obligations in good faith" by "failing to provide any calculation of the revenue attributable to NovaWave, refusing to devote necessary resources to sales and product development (and certainly not commercially reasonable efforts), and disregarding Scherer's repeated requests for critically needed support for research and development, engineering, and documentation."
Specifically, Scherer accuses Thermo Fisher of putting NovaWave on a "shoestring budget" and reducing its staff by 30 percent during the earn-out period. Further, Thermo Fisher discontinued NovaWave's pre-existing sales channels, halted e-mail campaigns, fired its sales staff, then refused to hire additional sales and marketing people, "and actively prevented the marketing of pre-existing products or the commercialization of products in development," he alleges.
Among Thermo Fisher's actions that undermined NovaWave and its ability to hit the targets that would have entitled the company to the $4 million and $1 million payments, Scherer said, was a reduction in NovaWave's presence at trade shows from typically a 100-square-foot booth to a three- to four-foot table space.
Also, Thermo Fisher provided no IT support to maintain and assure website functionality, and made no effort to "pursue additional product development for numerous promising technologies previously demonstrated by NovaWave," he said in his complaint.
Scherer seeks compensatory damages of at least $4 million with interest, and monetary damages to be determined during a trial. He also seeks restitution of at least $4 million; monetary damages of an amount to be determined during a trial; and punitive damages to be determined at trial.
Through a spokesman, Thermo Fisher declined to comment, citing the pending nature of the litigation.