Two long-pending lawsuits against Cybex have been resolved and the company is determining whether it will need to increase its litigation reserves to cover combined settlements. Cybex is expected to discuss the matter and reserve needs in its year-end and 4Q earnings call, which has not been set yet.
Kirila vs. Cybex
One decade-old lawsuit involved litigation brought in 1996 by Pyramid Fitness founder Gene Kirila, charging breach of contract along with a number of other “unfair” business practices after Cybex bought Pyramid in 1993. In June 2006, the Supreme Court of Pennsylvania said it would not hear Cybex’s appeal of the December 2005 ruling from the Superior Court of Pennsylvania that affirmed a nearly $2.5 million judgment from lower courts. At that time, Cybex said it would not pursue further appeals and was awaiting final affirmation of the final amount due Kirila to include additional interest and fees. Cybex has paid the judgment as determined by the court. To see a June 15, 2006, story, “Cybex loses final appeal attempt on $2.5 million Kirila verdict,” click here.
FreeMotion Fitness vs. Cybex
The suit, which was originally filed on Dec. 31, 2001, by the company which was then called Ground Zero, was dismissed with prejudice, with each side to bear its own costs. The papers were signed Jan. 22 by the Utah district court judge dismissing the patent infringement case that involved FreeMotion’s cable crossover machine. According to Cybex, a settlement was reached and, as a part of the agreement, Cybex will pay for and receive a license to use certain FreeMotion patents.
As of April 2006, Cybex had said it had $6.2 million available in anticipation of a possible loss in the Kirila and FreeMotion cases, as well as for another pending case alleging patent infringement for its Stableflex deck. If additional funds are needed, Cybex reported the pre-tax charge would likely be under $200,000 and would be taken in the fourth quarter of 2006, ended Dec. 31.