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Judge Hits Biotech Firm With $53.5M Judgment

(CN) - Biotech firm ArborGen Inc., and its founding members, MeadWestVaco Corp. and Rubicon Ltd., must pay $53.5 million to settle claims it failed to honor employees' rights under a long-term incentive plan.

In a lawsuit filed in the Dorchester County Circuit Court in November 2010, several current and former employees of ArborGen claimed the defendants willfully misled them in regard to the incentive plan, violating, among other things, the South Carolina Payment of Wages Act.

ArborGen was formed in February 2000 after the International Paper Company, MeadWestVaco (then, simply, the Westvaco Corporation), and New Zealand-based Rubicon (then the Fletcher Challenge Ltd.), decided to combine their forestry research and development programs.

The majority of the plaintiff employees were hired in 2002-2003, a period, they claim, when the new entity was valued at about $100 million. During a trial held in January 2015, the employees claimed they were led to believe their contracts included an option that would have enabled them to share in ArborGen's future growth.

The problem, they said, was once that growth did occur, the defendant ArborGen board members orchestrated a scheme to first dilute the original option plan, and then, switch it out for another.

The employees said when the plan change was explained to them, they were fed a steady stream of misrepresentations and outright lied to about their rights.

In 2010, ArborGen converted to a C-Corporation.

Over the course of the three-week trial, the employees maintained that as a result of this move they were entitled to receive an award in the successor incentive plan based on what they were promised when they were hired.

The defendants refused, ultimately giving the employees rights to a plan that's value was some 90 percent less than they were promised.

At the time, the plaintiffs said, ArborGen was valued at $650 million and they believed they were entitled to a share of about $550 million of that total.

At the conclusion of the trial, Judge Edgar Dickson ruled in favor of the plaintiffs on all claims but one -- an alleged violation of the S.C. Unfair Trade Practices Act.

Dickson explained that when the General Assembly enacted the Fair Trade Practices Act, the legislature's clear intention was for it to apply to business or consumer transactions.

The Act, he said, "does not apply to employee-employer relations," Dickson said.

On Dec. 14, he awarded the employees just over $10.8 million in actual damages and over $34.4 million in punitive damages, holding that the defendants had in fact engaged in an organized campaign to mislead the plaintiffs.

After the addition of prejudgment interest and attorney's fees. the award totaled $53.5 million.

Afterward, Chip Bruorton of Rosen Hagood in Charleston applauded the ruling, observing Dickson "took a great deal of time and effort to understand facts of the case and made a decision that is supported by the evidence presented."

At least one of the companies on the hook for the award, Rubicon Ltd., has already announced that it will appeal the judge's decision.

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