Luna Innovations Incorporated, a company focused on sensing and instrumentation solutions and pharmaceutical nanomedicines, voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Virginia.
The company emphasized last week that it expects to continue to operate normally to serve customers, develop and manufacture products, and maintain employment at all facilities during the restructuring process.
“The jury verdict in our dispute with Hansen Medical in April obviously presented a very serious potential negative outcome for Luna as well as its creditors, shareholders and other stakeholders,” said Kent Murphy, Chairman and CEO.
Luna was attracted to Roanoke from its original home in Blacksburg as the result of its relationship with Carilion Clinic. A jury ruled in April that Luna had breached its contract with Hansen Medical and had misappropriated trade secrets belonging to Hansen.
“As previously reported, the jury in our litigation proposed an award to Hansen in excess of $36 million,” Murphy added. “Since then, we have filed motions with the court in California to have the award reduced, and Hansen has filed motions to ask the court to increase the award. While we believe we have arguments as to why the award should be significantly reduced, there is no way to predict the outcome of the litigation.”
“In the absence of reasonable settlement of that dispute, we believe that today’s filing is in the best interests of Luna and our shareholders, creditors and communities, while providing the first step toward securing a future for Luna. We intend to build on our history of innovation and product development, outstanding products, and excellent customer service,” Murphy said.
As part of its filing for reorganization, Luna is requesting the Virginia court to estimate Hansen’s claims in litigation at less than $1.3 million. If that motion is successful before the court, company officers believe the proposed reorganization plan would result in creditors receiving 100 % of their allowed claims.
“The plan that we proposed and filed today, if confirmed by the court, would pay our creditors on their valid claims and leave our current shareholders in place while allowing us to continue to build upon the recent achievements of this company and the potential of our product pipeline,” Murphy said. “It was after long and careful consideration with our board of directors and outside advisors that we concluded this was the right move. I believe that the actions taken today represent the best path for Luna and all of our stakeholders.”
