GE pays Star $9.4 million to settle breach-of-contract case

Star also settles patent infringement suit

GE Medical Systems this month paid Star Technologies $9.4 millionto settle a breach-of-contract case related to CT reconstructionprocessors Star supplied to GE for four years (SCAN 5/8/96 and3/27/96). Star used some of the proceeds from the payment to buyback most of a preferred stock position in Star held by GE.

Star claimed that it suffered a 90% drop in revenues when Milwaukee-basedGE canceled a contract to buy the processors last year. The Sterling,VA, company took its complaint to an arbitration panel, as stipulatedby the contract between the vendors. The panel in March ruledthat GE owed Star $9.1 million plus interest.

GE appealed the ruling to a Delaware state court, as well asto the American Arbitration Association, but lost both appealsand last week made its payment to Star, which used the money tobuy back some of GE's preferred stock positionin Star. Star paidGE $2.4 million for the stock, which had an aggregate redemptionprice of $12.9 million, including undeclared dividends totaling$5 million.

The purchase reduced GE's stake in Star from 35% to 11%, accordingto Brenda Potosnak, Star's controller, and Star has an optionto acquire the remaining GE preferred shares. GE holds some StarTechnologies common stock that Star does not plan to acquire,she said.

Star will be forced to give up some of the remaining proceedsof the GE award, due to an unrelated patent infringement casewith Ronald Walters, a former contract employee. Walters fileda lawsuit against Star last year in a U.S. District Court in Ohio,charging the company with patent infringement related to a patenthe holds. The Walters patent covers an earlier version of theCT reconstruction processors Star sold to GE, according to Potosnak.

Star agreed to pay Walters $2.9 million to settle all of hisclaims against the company. Walters had originally sought over$67 million from Star, in addition to a trebling of damages.