Little Rock businessman Jennings Osborne, known for his holiday lights displays and philanthropic efforts, is suing the Stephens Inc. financial house over payments he wants from the sale a medical testing company, even though the firm fell short of sales targets after Stephens bought it.
Osborne says in a lawsuit filed in Pulaski County Circuit Court that he agreed to sell his firm Arkansas Medical Research Testing LLC in 2004 to companies held by Stephens Inc. for $20.3 million. But $10 million was to be made in a deferred payment – $9 million if the company reached set financial goals in the coming three years. Another $1 million would come from a non-compete agreement and to pay Osborne to consult for the company.
For two of the three years, the company did not meet sales goals, which Osborne claims in his lawsuit was because of “gross mismanagement.” Stephens has not replied to the lawsuit and a spokesman refused comment to Arkansas Business.
The result is that Osborne has not been paid $6 million that he would have gotten had the company reached revenue targets in the second and third years of the agreement. The lawsuit says that within six months under new management more than 90 percent of the firm’s customers had gone elsewhere.
Osborne would entertain customers to help ensure their loyalty, though the practice was curtailed or ended under Stephens, the lawsuit says. Further, a lawyer for Osborne says the U.S. Food & Drug Administration sent a 2007 warning letter to the firm in 2007.
According to the letter, the firm “did not adhere to the applicable statutory requirements and FDA regulations governing the conduct of clinical investigations and the protection of human subjects.” Such a censure makes it a challenge to win new customers, the suit says.
Osborne is suing on several counts, including breach of contract, breach of fiduciary duty and constructive fraud. He is seeking an unspecified amount of damages.
The suit was filed in October.
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