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Judge Sanctions Biolitec, Issues Warrant for CEO

(CN) - Laser manufacturer Biolitec must pay $1 million a month as a sanction for merging with an Austrian subsidiary in direct violation of a preliminary injunction, and its CEO faces a warrant "to stand before this court," a federal judge ruled.

U.S. District Judge Michael Ponsor said this case "has turned into a challenge to the very foundation of the rule of law."

In August 2012, the District of Massachusetts issued a preliminary injunction barring Biolitec AG (BAG), a manufacturer of diode lasers and optical fibers, from merging with its Austrian subsidiary, Biolitec Unternehmensbeteiligungs, because shareholders said the merger would place all of BAG's assets out of reach, as American judgments are unenforceable in Austria.

Despite assurances that the defendants would not consummate the merger, Biolitec notified the court last month that it had completed the merger in direct violation of the court's order, "when the Commercial Court of Vienna approved registration of the merger in Austria."

Ponsor reacted last week by issued an arrest warrant for Biolitec's CEO Wolfgang Neuberger. "The court asks the marshals to do everything possible to ensure that the warrant is effectuated internationally and Neuberger is brought to stand before this court," he wrote.

Biolitec also faces a fine of $1 million each month that it refuses to comply with the court's order. If it still refuses to cooperate by Aug. 1, 2013, Biolitec will be charged $8 million per month, according to the ruling.

"The effectuation of the downstream merger by defendants BAG, Biomed, and Wolfgang Neuberger - in the face of explicit reassurances to this court orally and in writing that defendants intended to comply - constitutes the most flagrantly offensive violation of a court order that this court has personally encountered," Ponsor wrote. "There can be no debate that all four of the prudential criteria that inform a court's consideration of a motion for civil contempt have been satisfied by clear and convincing evidence."

Ponsor emphasized his need to "move quickly to craft sanctions to coerce defendants to restore the status quo ante," a Latin phrase for "the way things were before."

"It may indeed be impossible, as defendants' counsel suggested, technically to 'rescind' the merger at this time," he added. "The court makes no finding on this point, beyond the observation that defendants' general credibility about what it can or cannot do is subject to doubt. In any event, defendants concede that restoring the status quo ante would in fact not be impossible, but merely lengthy, burdensome, and onerous."

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