XML 26 R16.htm IDEA: XBRL DOCUMENT v3.3.1.900
Litigation
3 Months Ended
Jan. 31, 2016
Litigation [Abstract]  
Litigation

(11)Litigation

 

The Company is also subject to certain claims and lawsuits that have been filed in the ordinary course of business.  From time to time, the Company initiates lawsuits against others to enforce patents or to seek collection of debts in the ordinary course of business.  The Company is not subject to any significant litigation, except as set forth below.

 

MGC Diagnostics Corporation v. Mr. Guy Martinot and Dr. Jean-Benoît Martinot

 

In November 2015, the Company commenced litigation in the French-speaking courts of Brussels, Belgium against the selling shareholders of Medisoft for violations of representations and warranties in the stock purchase agreement dated as of July 10, 2014 under which the Company purchased Medisoft.  The Company alleged that these violations resulted in Company damages of approximately €985,400  ($1,084,000).  In May 2015, the Company received payment of €406,700  ($447,000) with respect to these alleged violations pursuant to a bank guaranteed contractual escrow fund and has reflected that payment on its books and records.  The defendant selling shareholders have advised the Company that they intend to assert a counterclaim against the Company.  The Company has not accrued any losses related to the litigation or accrued any related legal costs it has not yet incurred.  The Company currently expects that this litigation process may continue until the fall of 2017.

 

NeuroVirtual USA, Inc. v. MGC Diagnostics Corporation

 

On January 12, 2016, NeuroVirtual USA, Inc. commenced a lawsuit against the Company in the United States District Court for the Southern District of New York asserting breach of contract, anticipatory breach of contract, and fraud in the inducement.  NeuroVirtual commenced the lawsuit after MGC, in a letter dated December 17, 2015, informed NeuroVirtual that MGC was rescinding a distribution agreement dated March 31, 2014 between NeuroVirtual and MGC because, among other things, NeuroVirtual failed to comply with applicable Minnesota law in connection with the distribution agreement.  NeuroVirtual has alleged (i) damages of $1,055,120 for breach of contract, (ii) damages of $1,363,850 for anticipatory breach of contract; and (iii) damages of no less than $5.0 million for fraud in the inducement.  MGC believes that its rescission of the distribution agreement was proper and that it has valid defenses to the NeuroVirtual claims.  On February 25, 2016, MGC filed an Answer and Counterclaim against NeuroVirtual alleging NeuroVirtual’s actions violated Minnesota law and claiming consequential damages in excess of $500,000.  The Company has not accrued any losses related to the litigation, including any purchase commitments due as of December 31, 2015, or accrued any related legal costs it has not yet incurred.  At this time, the Company is unable to provide an estimate of a possible loss, or a range of loss in connection with this lawsuit.