Legal Proceedings

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

15. LEGAL PROCEEDINGS

UTHE Technology Corporation v. Aetrium Incorporated

Since December 1993, an action brought by UTHE Technology Corporation (“UTHE”) against ATRM and its then sales manager for Southeast Asia (“Sales Manager”), asserting federal securities claims, a RICO claim, and certain state law claims, had been stayed in the United States District Court for the Northern District of California. UTHE’s claims were based on its allegations that four former employees of a Singapore company, which UTHE formerly owned, conspired to and did divert business from the subsidiary, and in turn UTHE, and directed that business to themselves and a secret company they had formed, which forced UTHE to sell its subsidiary shares to the former employee defendants at a distressed price. The complaint alleged that ATRM and the Sales Manager participated in the conspiracy carried out by the former employee defendants. In December 1993, the case was dismissed as to the former employee defendants because of a contract requiring UTHE and them to arbitrate their claims in Singapore. The District Court stayed the case against ATRM and the Sales Manager pending the resolution of arbitration in Singapore involving UTHE and three of the former employee defendants, but not involving ATRM or the Sales Manager. ATRM received notice in March 2012 that awards were made in the Singapore arbitration against one or more of the former employee defendants who were parties to the arbitration. In June 2012, UTHE filed a motion to reopen the case against ATRM and the Sales Manager and to lift the stay, which the court granted. On September 13, 2013, the court entered final judgment dismissing all remaining claims UTHE asserted against ATRM in the litigation. On September 23, 2013, UTHE appealed the district court judgment to the United States Court of Appeal for the Ninth Circuit only as to the dismissal of UTHE’s RICO claim. The appeal was argued in a court hearing on November 19, 2015. On December 11, 2015, the Court of Appeal issued an order reversing the district court’s grant of summary judgment of UTHE’s RICO claim and remanded the case back to the district court for further proceedings. On April 20, 2016, the district court stayed the case pending a decision in the Supreme Court case RJR Nabisco, Inc. v. The European Community, No. 15-138. A decision in the RJR Nabisco case was issued on June 20, 2016. On July 14, 2016, ATRM filed a motion for summary judgment in the district court seeking dismissal in light of the RJR Nabisco decision. A hearing is scheduled on the motion for August 18, 2016. If the case is not dismissed on summary judgment, trial is expected to be scheduled in the fourth quarter of 2016. We continue to believe that the claims asserted in this matter do not have any merit and intend to vigorously defend the action. While it is not possible to predict the outcome of these legal proceedings, the cost associated with such proceedings could have a material adverse effect on our consolidated results of operations, financial position or cash flows of a future period.

Avila Plumbing & Heating Contractor, Inc. v. Modular Fun I, Inc. f/k/a KBS Building Systems, Inc. & KBS Builders, Inc. (Maine Superior Court, Oxford County, CV-15-39)

Avila Plumbing and Heating Contractor, Inc. (“Contractor”) had alleged that Modular Fun I, Inc., f/k/a KBS Building Systems Inc. & KBS Builders, Inc. (the “KBS Parties”) had failed to pay Contractor $476,477.46 that Contractor had claimed it was entitled to pursuant to contracts between it and the KBS Parties. Contractor had claimed it entered into agreements with the KBS Parties in relation to two separate projects to supply materials and furnish services relating to the design and installation of plumbing and HVAC systems. Contractor had claimed it did the work and furnished the materials contracted for and that the KBS Parties had not paid it pursuant to the contract. KBS had countersued for breach of contract and negligence, claiming that Contractor had failed to properly complete the plumbing and HVAC services it was retained to perform on one of the projects. The general contractor on that project had refused to pay KBS $518,842 that KBS was owed citing significant deficiencies in work performed and materials installed by Contractor as its reason for withholding payment from KBS. KBS had filed a lien in the amount of $518,842 on the property where such project is located and had brought a separate suit against the general contractor and others in Middlesex Superior Court in Massachusetts to enforce its lien and collect the amount owed to KBS on the project. The case was dismissed on April 12, 2016.

KBE Building Corporation v. KBS Builders, Inc., and ATRM Holdings, Inc., et. al.

At the time of the KBS acquisition in April 2014, KBS purchased receivables for a construction project known as the Nelton Court Housing Project (“Nelton Court”) in Hartford, CT, and also performed certain “punch-list” and warranty work. Modular units for the Nelton Court project were supplied by KBS Building Systems, Inc. (“KBS-BSI”) pursuant to a contract with KBE Building Corporation (“KBE”). KBE has asserted claims against KBS-BSI, KBS and ATRM arising out of alleged delays, and for the repair of certain alleged defects in the modular units supplied to the project. KBE’s claim seeks an un-specified amount of damages. The action is still in the pleadings stage. The action has been transferred to the complex litigation docket of the Hartford Superior Court and remains in the pleadings stage with discovery stayed by the Court until the time of an August 15, 2016 status conference.