Roughly three years after Orthofix Medical abruptly fired its CEO, CFO and CLO citing inappropriate and offensive conduct, the legal battles it sparked between the company and its former executives have proved costly for the company — and the litigation isn’t over yet.
The Lewisville, Texas-based company revealed in its latest 10-Q filing that it has collectively paid the former executives about $24 million in damages in connection with their breach of contract claims related to their firings. The damages shine a new light on a difficult chapter for the company and leadership involved in the spine device maker’s 2023 C-suite ousting.
The Sept. 11, 2023 terminations rattled investors, with shares plunging 30% following the news. In subsequent litigation, texts exchanged privately between the men surfaced as having been part of the conduct that led the board to let them go.
Now attorneys for Keith Valentine, the late John Bostjancic and Patrick Keran, previously the company’s CEO, CFO and CLO, respectively, say the damages obtained via arbitration and settlements show their clients have prevailed on claims of “improper for cause termination,” according to a release on the damages from the law firm of Olshan Frome Wolosky.
“What is implicit in the arbitrator’s decision is these guys got railroaded and there was obviously no reason to be terminated for cause,” Kyle Bisceglie, one of the ex-Orthofix executives’ attorneys, told CFO Dive in an interview.
An Orthofix spokesperson declined to comment on the damages beyond the company’s filings with the Securities and Exchange Commission, noting that the Aug. 5 filing contained “important information about this matter.”
Timing and damages
The former CEO Valentine’s litigation seeking damages advanced first, with an initial decision coming from a California arbitrator in January and a final award decision coming in June, according to Orthofix’s August securities filing.
In its filing, the company said it had paid the former CEO $14.8 million in April, equal to the severance and “equity-based” rights plus accrued interest he would have gotten had he been fired without cause. In June, the arbitrator also awarded Valentine $1.1 million for attorneys fees, costs and expenses. The company said it settled Keran’s arbitration claims and reached a settlement agreement with Bostjancic, paying each $4.25 million in the second quarter of this year.
The relatively simple issue underpinning the arbitrator’s decision to award Valentine damages came down to timing: Valentine and all of the men had June 19, 2023 severance agreements governing their employment while most of the texts were sent in 2022, prior to the contracts’ effective dates. Each of the three were previously employed by SeaSpine Holdings, which merged with Orthofix in early 2023.
“The Arbitrator granted Claimant’s motion, finding that under the Term of the Contract section, text messages sent prior to the signing of the Severance Agreement could not be considered for termination cause reasons,” Bernard G. Skomal, the arbitrator, wrote in a June 24, 2026, 101-page document which awarded Valentine compensatory damages.
The primary legal holding of the arbitrator, Bisceglie said, was “you can’t even look at these text messages as the commission of one or more material acts of moral turpitude since they predated the effective date.”
The texts
While the former executives prevailed on the timing issue, the arbitrator flagged graphic texts that emerged in the company’s independent investigation — which led to the imaging of executives' phones — and weighed in on whether the communications constituted acts of “moral turpitude.”
Whether the messaging constituted engaging in “material acts of moral turpitude” mattered because it could be cause for termination under their contracts, and the messages were cited at the time of their firing, according to letters included in court filings,
In some of the texts detailed in the arbitrator’s final award decision, the men discuss the bodies of employees at the company, a board member and others in sexual or threatening ways. For instance, on Sept. 29, 2022, Keran texted that then board chair Cathy Burzik should do an unspecified activity “with my fist up her ***” Bostjancic then reportedly replied “you gotta use the fist with the thumb cast on.” The arbitrator’s decision noted that Valentine “did not stop this conversation,” according to examples included in the arbitrators June decision.
It was Burzik, as then board chair, who signed letters in September of 2023, to each of the three men stating that the board had reviewed “a variety of work-related conduct matters, including but not limited to highly offensive and inappropriate business related text messages. and that their termination “for cause” was effective immediately with the board having determined they had breached multiple duties including “engaging in acts of moral turpitude.”
Moral turpitude describes behavior constituting “an immoral, unethical, or unjust departure from ordinary social standards.” However, according to Cornell Law School’s Legal Information Institute, the term has not “been clearly delineated by courts.”
In its SEC filing, Orthofix stated that the arbitrator found that Valentine’s conduct in the period between the agreement signing and his firing did not constitute cause. However, the company asserted he denied Valentine’s defamation claims, finding that the former CEO’s “conduct met the legal definition of ‘acts of moral turpitude’ and that the public statements that the Company made about Mr. Valentine in a press release and filings with the SEC subsequent to the termination of his employment were true.”
Bisceglie acknowledged that moral turpitude is a provision that can be interpreted in many ways. But he asserted that these messages were among friends chatting on personal phones, sometimes at five in the morning and 11 at night.
“We would argue text messages among three friends, even if they’re text messages that are inappropriate in the light of day...if they don’t affect anyone and they’re not known by anyone, that is not the type of commission and material act that the contract is referring to,” he said. “There’s some behavior that people intend to be private.”
Posthumous relief
In a statement in his attorney’s release, Valentine expressed a sense of vindication at the outcome and gratitude for the support of former employees, distributors and surgeons who collectively sent hundreds of calls and messages of support.
“Orthofix repeatedly stated that its decision to terminate me, John and Pat for cause was ‘unanimous,’” Valentine said. “It now has been determined that the Orthofix Board was unanimously wrong and unanimously breached my employment contract... I continue to believe that the Orthofix Board was wrong to prioritize personal sensitivities and animus about our private texts over the Company's long-term value.”
The timing was poignant. The 55-year-old Bostjancic passed away on Sept. 20 after battling brain cancer, according to his obituary and his attorney.
“His kids worship him and the eulogy that each of his children gave was heartwrenching,” Bisceglie said. “It’s a travesty that Bos has to go through this but at least in the end he was vindicated and was also able to get it wrapped up before he passed.”
Keran ia still fighting the company in another action in California State Court. The complaint, filed in September 2024 against former director and interim CEO Burzik and current director Wayne Burris, seeks relief for alleged defamation, false light invasion of privacy and tortious interference with contract, according to the SEC filing. The company in the filing said it “disagrees with the allegations contained in the action…and will continue vigorously defending the asserted claims.”
Bostjancic dismissed his claims in the matter as part of his settlement agreement. Bisceglie said that Valentine also dropped out of the litigation, leaving only Keran remaining.
