McGaw Ordered to Pay $4.9 Million for Breach of Contract

An arbitration panel has ruled that McGaw Inc., a major hospital supply company, must pay $4.9 million to a small San Bernardino medical supplies distributor for breach of contract.

The panel’s recent ruling in favor of the San Bernardino company, Acacia Inc., was disclosed Tuesday by Acacia’s attorney, Scott B. Campbell.

The legal dispute between McGaw and Acacia stems from a contract allowing McGaw to use pumps made by Acacia to fill two of McGaw’s drug infusion devices, according to Campbell.

McGaw, which provides intravenous solutions and related equipment to hospitals and health-care providers, entered into a contract with Acacia in 1990 to exclusively market Acacia’s pumps. But McGaw later decided to promote the products of an Acacia competitor, Excelsior Medical Corp., breaching its contract with Acacia, the attorney said. Excelsior was formed by David Lumia, son-in-law of Acacia owner James Sullivan, Campbell said.

In addition, Campbell said, McGaw divulged Acacia’s “trade secrets” to Excelsior regarding two other Acacia products so that Excelsior could manufacture them. At the time, Excelsior was located in Redlands, Campbell said, but it has since moved to New Jersey.

“The fact is McGaw treated my client . . . like dirt,” Campbell said.

McGaw’s president, Norwick Goodspeed, declined to comment Tuesday. Irvine-based McGaw is a subsidiary of IVAX Corp., a Miami manufacturer of generic drugs.

Acacia, an 18-year-old company with eight employees, sought arbitration against McGaw in 1993. The three-member American Arbitration Assn. panel handed down the $4.9-million award Jan. 17.

At one point in the legal proceedings, Campbell said, McGaw took its case to Orange County Superior Court in an effort to stop the arbitration, but the court denied the petition.

IVAX purchased McGaw in 1994 in a stock swap valued at about $440 million.