By Justine Griffin / July 22, 2019
TAMPA — The Laser Spine Institute may have closed its doors suddenly in March, but repercussions from the surgery center’s business practices continue to reverberate in the courts.
Two local lawsuits provide the clearest picture yet of the forces that led the Tampa company to shut down, resulting in the loss of some 500 jobs. Documents detail a years-long legal battle among three business partners, a penchant for paying large executive salaries and bonuses, and a struggle against mounting debt.
Another factor: ego. At one point, two of the founders dared their partner to sue them, telling him the company was making so much money it wouldn’t matter. When the partner called their bluff, his lawsuit ended up being a decisive blow that helped put Laser Spine in the grave.
That case came to a head June 30, when a judge in Hillsborough County Circuit Court awarded Joe Samuel Bailey $260 million in damages, capping what had been a 13-year battle between Bailey and Laser Spine founders, Dr. James St. Louis and Dr. Michael Perry.
Bailey accused them of breach of fiduciary duty, defamation, slander, violation of the Florida Deceptive and Unfair Trade Practices Act, conspiracy and tortious interference.
Following two long bench trials and appeals, he now assumes a majority share in the remains of Laser Spine, which is undergoing an insolvency process. Similar to a federal bankruptcy filing, the process assesses all equipment and other materials Laser Spine owned or controlled and decides what is valuable enough to sell.
“My client had his business gutted in 2004, and now we’re in 2019 and he still has not received any compensation,” said Jennifer Altman, an attorney in Miami who represented Bailey. “This is very much delayed justice. But we’re very pleased with the results, which we believe are the correct results.”
Bailey’s case has been complicated, but well-known in some circles for its often bizarre twists and turns. It is steeped in the health care industry’s relationships with marketing, public relations, financing, and the egos of high-profile doctors. And it highlights the executive decisions that appear to have led the company to ruin.
Bailey, the former marketing consultant for the Bonati Institute in Pasco County, once worked with St. Louis and Perry. In 2004, they founded the Laserscopic Spinal Centers of America, Inc., and its holding companies. The practice began treating patients with minimally invasive spinal surgery.
At the time, Laserscopic’s business model was unique, according to a 2016 appeals court document, and St. Louis was one of fewer than 10 surgeons in the country who specialized in endoscopic minimally invasive spine surgery. Bailey, Perry, St. Louis and another partner, Ted Suhl, became the company’s four directors and held ownership interest.
Revenue jumped from around $100,000 in August 2004, to $250,000 that September. By that October, it hit $650,000, court documents show.
The early growth caught the interest of an investment company, EFO Holdings L.P.
William Esping and Robert Grammen, partners in EFO, offered to invest $3 million in Laserscopic Spinal in exchange for 55 percent of the company, control of its board of directors and a 7 percent return on its vested capital. Court documents detail how Bailey felt pressured.
“You’re going to accept this offer or we’re going to take your doctors and we’re going to take your company. And we’re going to go up the street and we’re going to do it ourselves,” Grammen said to Bailey, the documents say. St. Louis, Perry and their attorneys did not respond to requests for comment.
Two days after EFO’s offer to invest, St. Louis and Perry told Bailey they were leaving Laserscopic Spinal to create a competing company with the EFO investment firm. Court documents say that St. Louis and Perry met privately with Esping and Grammen on several occasions. They then formed the Laser Spine Institute just 22 days after issuing their original offer to Laserscopic.