NEW YORK--(BUSINESS WIRE)--This past month the Appellate Division First Department upheld the denial of a Motion to Dismiss filed by Sam Waksal and Kadmon Corporation, which he founded in 2010, relating to the breach of contract claim filed in 2014 by Dr. Steven Rosenfeld. The case is pending in N.Y. Supreme Court Commercial Division 650360/2014.
The law suit currently seeks $150,000,000 as a result of 6% equity stake allegedly promised to Dr. Rosenfeld and his partner in exchange for their assistance in raising funds for Kadmon after Dr. Waksal was released from incarceration from his insider trading conviction in 2003 related to his prior firm ImClone. Kadmon recently announced in a June 10, 2016 released S-1 filing that it intends to go public and raise $115 million in funds. While the S-1 filing mentions the pending legal action, it also states that the company did not set aside any funds to cover any potential liability for such law suit and the S-1 did not inform investors of the alleged damages that are being sought in the law suit which is in the discovery phase. Further, since the filing of the S-1, Kadmon’s appeal to the New York Appellate Division seeking the dismissal of the law suit was categorically denied by the appellate court on May 26, 2016. Due to the lack of any reserve fund for the litigation, it is unknown at this time what portion of the funds raised via the public offering may eventually be utilized to pay damages in the action, if the company were to be found liable. In denying the appeal the Appellate Division also awarded Dr. Rosenfeld his costs related to having to fight the appeal. Stuart Meissner Esq. of Meissner Associates, who represents the plaintiff in the case, referring to the Appellate Division decision stated, “We are very pleased with the higher Court’s quick and decisive ruling. It would seem that any public investors considering in investing in Kadmon’s IPO should be fully apprised of the risk of its potential liability due to this action.”