La-Z-Boy Inc. will pay a Florida firm $13.5 million in damages stemming from a jury verdict in a civil lawsuit that found the home furniture company violated the terms of a license agreement with the furniture power supply company for its home chairs.
La-Z-Boy said in an SEC filing Dec. 21 that it will pay Megdal Associates LLC $13.5 million during the third quarter of fiscal 2018. The filing, disclosed Dec. 27, noted that neither La-Z-Boy nor Megdal assumes admission of liability or wrongdoing as part of the settlement.
In 2002, Megdal and Michigan-based La-Z-Boy reached an agreement, in which Megdal agreed to license its power footrest technology for La-Z-Boy recliners, love seats, sofas and sectionals, and in turn, receive royalties for chairs sold that included its technology.
Megdal sued La-Z-Boy in November 2014 in the U.S. District Court in the Southern District of Florida for breach of contract, alleging that La-Z-Boy did not pay the firm royalties over the ensuing years. However, La-Z-Boy contended that it was using its own developed electronic technology to power its chairs, separate from Megdal's patented technology, according to the court documents. La-Z-Boy claimed the improvements on the powered footrest technology were separate from those covered under the licensing agreement.
In March 2016, a jury awarded Megdal $5.78 million in damages.
Seeking to bring an end to the legal dispute, the two companies reached a settlement agreement.
According to the Dec. 21 regulatory filing, the settlement includes $5.5 million from the jury decision, which La-Z-Boy said it recorded as an expense in its fiscal 2016 consolidated income statement. It has also accrued another $3.9 million from royalties and interest for chairs sold with the power technology between Feb. 2016 and October 2017. The company will recognize the remaining $4.1 million as a charge in its fiscal third quarter.