SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) FEBRUARY 16, 2000
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Commission File Number 000-23386
CRYO-CELL INTERNATIONAL, INC.
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(Name of Small Business Issuer in its charter)
DELAWARE 22-3023093
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3165 MCMULLEN BOOTH ROAD, BUILDING B, CLEARWATER, FL 33761
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(Address of Principal Executive Offices) (Zip Code)
Issuer's phone number, including area code: (727) 723-0333
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
BACKGROUND INFORMATION
On March 8, 1999, the Company, the Company's CEO and Chairman, the
Company's Executive Vice President, and the Company's legal counsel were named
as the defendants in a lawsuit filed in the Superior Court of Orange County,
California by Horwitz & Beam, the attorneys which had represented CRYO-CELL in
its suit against the University of Arizona et al. The plaintiff alleges breach
of contract and seeks payment of $129,822 in allegedly unpaid fees and costs
associated with the University of Arizona litigation. The plaintiff also asserts
claims of misrepresentation. In reference to these misrepresentation claims,
plaintiff has filed a Statement of Damages, which asserts $1,000,000 in general
damages and $3,500,000 in punitive damages.
Accordingly, on June 14, 1999, the Company filed: (1) an answer denying
all liability; (2) a counterclaim for breach of contract and malpractice,
seeking in excess of $1 million in compensatory damages arising from the
malpractice; (3) a motion to dismiss the individual defendants for lack of
jurisdiction; and (4) a motion to dismiss all punitive damages allegations
against the Company.
RECENT EVENT - JUDGE'S RULING
On December 17, 1999, Judge Alicemarie H. Stotler of the United States
District Court in the Central District of California, issued an Order in which
she: (1) granted CRYO-CELL International, Inc.'s ("CRYO-CELL") Motion to Strike
Punitive Damages and Dismiss Part of the Complaint; (2) granted Daniel
Richard's, Mark Richard's and Gerald F. Maass' (the "Individual Defendants")
Motion to Dismiss Complaint for Lack of Personal Jurisdiction; and (3) granted
in part and denied in part Horwitz & Beam, Inc.'s ("H&B") Motion for Order
Dismissing Counterclaim and/or Strike Portions Thereof. As discussed in more
detail below, the net effect of this order was to reframe the Complaint as a fee
dispute, as opposed to a multi-million dollar claim for fraud against CRYO-CELL
and its corporate officers. By its order, the Court has barred recovery in this
action against the Individual Defendants, and has reduced CRYO-CELL's exposure
from over $3.5 million dollars to $129,822, plus a possible award of attorneys'
fees.
By granting CRYO-CELL's Motion to Strike Punitive Damages and Dismiss
Part of the Complaint, the Court dismissed H&B's Fourth Claim for Relief for
intentional misrepresentation, i.e., fraud, against CRYO-CELL and the Individual
Defendants. The Court held that the promises purportedly made to H&B concerning
the opening of an "escrow," even if not ultimately fulfilled, were not
fraudulent. In fact, the Court said that "although the Individual Defendants
clearly made representations that an 'escrow' would be established, their not
having done so, in light of uncertainties of the future course of litigation and
their misgivings of plaintiff's performance, suggests nothing more than a
negotiation of payment terms."
The Court granted CRYO-CELL's Motion to Strike Punitive Damages Claims
with respect to H&B's Fifth Claim for Relief because such damages are not
available in connection with negligence claims. Having dismissed the Fourth
Claim for Relief for Fraud, H&B's motion to strike the punitive damages claimed
in connection therewith was rendered moot.
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The Court granted the Individual Defendants' Motion to Dismiss for Lack
of Personal Jurisdiction, holding that the fiduciary shield doctrine insulates
them from the Court's exercise of personal jurisdiction. The fraud-based
exception to this doctrine does not apply in that H&B's fraud claim was
dismissed.
In granting H&B's Motion for Order to Strike Portions of CRYO-CELL's
Counterclaim, the Court held that the facts pleaded with respect to H&B's
concealment of the loss of its claims against Cord Blood Registry could not
support a claim for punitive damages. Accordingly, the punitive damages claim
was dismissed. If, through discovery, we identify additional facts concerning
the concealment and the threats such that we are able to plead with more
particularity to satisfy the judge, we can consider seeking leave of court to
amend the Counterclaim to reinstate our claim for punitive damages. In addition,
the Court held that because the Retainer Agreement between the parties did not
contemplate an award of attorneys' fees in the event that CRYO-CELL sues for
legal malpractice, CRYO-CELL cannot seek attorneys' fees.
Finally, the Court denied H&B's motion to strike the purportedly
disparaging comments in the Counterclaim concerning H&B's conduct of the
underlying litigation because H&B failed to make a showing sufficient to
establish that the remarks were scandalous, impertinent or immaterial.
CRYO-CELL has established an escrow in the amount of $359,000 to cover
the disputed legal fees ($129,822) and the 20% recovery of the Judgement against
the University of Arizona and David Harris. The Company has requested the
release of approximately $70,000 from escrow, which is the excess of 20% of the
$800,000 actual settlement amount. The overage is a result of CRYO-CELL's
settlement of the $1,170,000 original jury award.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRYO-CELL INTERNATIONAL, INC.
Date: February 16, 2000 By: /s/ Daniel D. Richard
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Daniel D. Richard
Chief Executive Officer
