To counter these arguments, EchoCath claimed that the numbers they provided were factual. However, given the changes that occurred and the fact that their product was considered to be new / experimental, were signs that this transaction was risky from the beginning (which MedSystems was aware of). As their advisors told them of these possible issues during the initial consultation stages (which are underscoring how the company was aware of these issues early on). (Chrisman, 2001, pp. 201 — 225) (“EP MedSystems vs. EchoCath,” n.d.)
After hearing both sides of the arguments, the District Court threw out the lawsuit that was filed by MedSystems. This is because the lower court, believed that the company was aware of: these risks and were liable for the losses (due to the fact that they did not conduct the proper due diligence). However, they appealed the case to United States Court of Appeals. As they reversed the decision of the lower court, by finding that the judge acted improperly in throwing out the lawsuit.
With the justices in the U.S. Court of Appeals saying, “We have concluded that MedSystems central allegation, that EchoCaths CEO gave MedSystems executives assurances that, after lengthy negotiations, contracts with four identified companies were imminent and provided sales projections that were an integral part of these assurances, should not have been dismissed.” (“EP MedSystems vs. EchoCath,” n.d.) This is significant, because it shows how the claims made by MedSytems were correct in regards to the actions taken by EchoCath.
Therefore, the results of the case are showing: how all companies need to be able to provide information, that they think is accurate and can be achieved within the stated time frames. This is important, because it is highlighting the basic standards that were used by the Court of Appeals, to determine how various securities laws were violated by EchoCath.
EP MedSystems vs. EthoCath. (n.d.).
Securities Fraud and Insider Trading. (n.d.). 933 — 934.
Chrisman, R. (2001). Violator.