Friday, September 11, 2009
Bankruptcy has cost Luna contracts, employees, official testifies
Since it filed for bankruptcy nearly two months ago, Luna Innovations Inc. has seen its business rapidly deteriorate as contracts have been lost and employees have fled, according to court testimony this morning.
During a hearing held before the U. S. Bankruptcy Court for the Western District of Virginia in Roanoke, Scott Graeff, Luna’s chief operating officer, testified that the Roanoke-based technology company has lost eight government contracts worth a total of $4.2 million since filing for Chapter 11 protection on July 17.
Additionally, 10 engineers have left the company, seven of whom held a Ph.D. and represented a significant loss to Luna’s ability to secure contracts and continue to reach research and development goals, Graeff testified.
"We will quickly be shifting from cracking to crumbling if this continues on," he said.
With locations in Roanoke, Blacksburg, Charlottesville and Danville, Luna develops and manufactures products for the health care, telecommunications, energy and defense markets.
Graeff said that while Luna executives anticipated they would see a dip in product sales, they did not think they would see such an impact on contracts and employee retention. Government contracts represent between 75 percent and 80 percent of Luna’s revenues.
Luna, once hailed as a rising star for Roanoke’s future economic development around high-tech biomedical companies, has been caught in a downward spiral since a California jury ordered it to pay Hansen Medical Inc. $36.3 million in damages for breach of contract and misappropriation of trade secrets.
Since the jury verdict was announced in April, Luna had sought to have it thrown out, while Hansen has asked that the damages be increased by nearly $20 million. But instead of continuing to fight the verdict in California, Luna opted to ask a federal bankruptcy judge in Virginia to determine what it owes Hansen, suggesting that $1.3 million would be a better amount.
Hansen, whose attorneys are also in Roanoke for today’s bankruptcy proceedings, has asked the bankruptcy court to send the case back to California to let that judge determine the ultimate amount Luna owes. The California verdict has never been officially entered into judgment, leaving the case in limbo. A bankruptcy filing halts all other court proceedings.
During a hearing held before the U. S. Bankruptcy Court for the Western District of Virginia in Roanoke, Scott Graeff, Luna’s chief operating officer, testified that the Roanoke-based technology company has lost eight government contracts worth a total of $4.2 million since filing for Chapter 11 protection on July 17.
Additionally, 10 engineers have left the company, seven of whom held a Ph.D. and represented a significant loss to Luna’s ability to secure contracts and continue to reach research and development goals, Graeff testified.
"We will quickly be shifting from cracking to crumbling if this continues on," he said.
With locations in Roanoke, Blacksburg, Charlottesville and Danville, Luna develops and manufactures products for the health care, telecommunications, energy and defense markets.
Graeff said that while Luna executives anticipated they would see a dip in product sales, they did not think they would see such an impact on contracts and employee retention. Government contracts represent between 75 percent and 80 percent of Luna’s revenues.
Luna, once hailed as a rising star for Roanoke’s future economic development around high-tech biomedical companies, has been caught in a downward spiral since a California jury ordered it to pay Hansen Medical Inc. $36.3 million in damages for breach of contract and misappropriation of trade secrets.
Since the jury verdict was announced in April, Luna had sought to have it thrown out, while Hansen has asked that the damages be increased by nearly $20 million. But instead of continuing to fight the verdict in California, Luna opted to ask a federal bankruptcy judge in Virginia to determine what it owes Hansen, suggesting that $1.3 million would be a better amount.
Hansen, whose attorneys are also in Roanoke for today’s bankruptcy proceedings, has asked the bankruptcy court to send the case back to California to let that judge determine the ultimate amount Luna owes. The California verdict has never been officially entered into judgment, leaving the case in limbo. A bankruptcy filing halts all other court proceedings.
