Orthofix pays executives 24 million dollars

Orthofix Medical has paid its former executives approximately $24 million in damages related to their breach of contract claims, according to the company’s latest 10-Q filing. The payments were made to former CEO Keith Valentine, former CFO John Bostjancic, and former chief legal officer Patrick Keran, who were abruptly fired in September 2023 due to allegations of inappropriate and offensive conduct.

The firings led to a significant decline in the company’s stock price, with shares plunging 30% following the news. The former executives subsequently filed litigation against the company, which has now resulted in the payment of damages via arbitration and settlements.

Attorneys for the former executives say the damages demonstrate that their clients have prevailed on claims of “improper for cause termination.” Kyle Bisceglie, one of the attorneys, stated that the arbitrator’s decision implies the former executives were “railroaded” and that there was no valid reason for their termination.

Arbitration and Settlements

The company paid Valentine $14.8 million in April, which included severance and “equity-based” rights plus accrued interest. Valentine was also awarded $1.1 million for attorneys’ fees, costs, and expenses in June. Keran and Bostjancic each received $4.25 million in settlements, according to the company’s SEC filing.

The arbitrator’s decision to award Valentine damages was based on the timing of the events, as the severance agreements governing the executives’ employment were signed on June 19, 2023, while most of the texts in question were sent in 2022, prior to the contracts’ effective dates.

The arbitrator found that the text messages sent prior to the signing of the severance agreements could not be considered as grounds for termination. However, the arbitrator did flag graphic texts that emerged during the company’s independent investigation, which led to the imaging of executives’ phones.

These texts included discussions about the bodies of employees, a board member, and others in sexual or threatening ways. The arbitrator’s decision noted that Valentine did not stop the conversation, despite being part of it.

Implications of the Decision

The decision involves the concept of “moral turpitude,” which describes behavior constituting an “immoral, unethical, or unjust departure from ordinary social standards.” According to Cornell Law School’s Legal Information Institute, the term has not been clearly delineated by courts.

Bisceglie argued that the text messages, although inappropriate, were private conversations among friends and did not affect anyone or constitute a material act of moral turpitude. Valentine expressed a sense of vindication at the outcome and gratitude for the support of former employees, distributors, and surgeons.

Keran is still fighting the company in another action in California State Court, seeking relief for alleged defamation, false light invasion of privacy, and tortious interference with contract. The company has stated that it disagrees with the allegations and will continue to defend the claims.

The settlement agreement with Bostjancic included the dismissal of his claims in the matter, while Valentine also dropped out of the litigation, leaving only Keran remaining. The company’s SEC filing noted that the arbitrator found Valentine’s conduct met the legal definition of “acts of moral turpitude,” but the damages payment suggests that the company’s decision to terminate the executives was not entirely justified.

Keran’s complaint, filed in September 2024, seeks relief for alleged defamation, false light invasion of privacy, and tortious interference with contract. The complaint was filed against former director and interim CEO Burzik and current director Wayne Burris.