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  • Writer's pictureThakur Law Firm, APC

Excellus Holdings, LLC Trial Victory of $2.5 Million in Fraud Case Against Dr. Shihata & FemCap, Inc

SAN DIEGO CA – On February 7, 2023, San Diego County Judge Ronald Frazier handed down a long-awaited decision in the matter of FemCap, Inc. v. Excellus Holdings, LLC Case No. 37-2020-00015382-CU-BC-CTL.

After 10 days of testimony that spanned over four months, Judge Frazier ruled in favor of Excellus Holdings, LLC (“Excellus”), represented by Thakur Law Firm APC, against FemCap, Inc. (“FemCap”) and FemCap’s owner, CEO and Medical Director, Alfred Shihata, both represented by The Law Office of Edward W. Freedman, for fraud and breach of contract. The trial victory awarded Excellus recission of the contract for the sale of FemCap’s product, FemmyCycle, and ordering the return of the purchase price of $1.15 million dollars, as well as awarded additional consequential damages in the amount of $1.15 million dollars and a prejudgment interest of $373,671.23 from the date of the purchase. Judge Frazier’s 13-page decision summarized how Shihata fraudulently concealed critical information regarding the regulatory status of the FemmyCycle product, a feminine-hygiene product regulated as a medical device by the U.S. Food and Drug Administration (“FDA”), while also breaching multiple covenants within the purchase agreement. Judge Frazier’s ruling against FemCap and Shihata was a significant milestone and critical win in a three-year legal battle.

The Final Statement of Decision issued by court found that Shihata and Femcap not only breached the terms of the purchase and sale agreement for the FemmyCycle product but concealed pertinent facts throughout its sale to Excellus. The Court stated that whereas “Excellus performed all, or substantially all, of its obligations[,]” Femcap through Shihata per the agreement failed to disclose all material records and information relating to the FemmyCycle product to Excellus. The court determined that such failings by Femcap and Shihata constituted a “material breach” of the agreement. The court further found that Shihata and Femcap during the sale of Femmycycle fraudulently concealed from Christopher Petty and Monica Chinisaz, the managing members of Excellus that Femmycycle was not compliant with Health Canada and FDA regulations, Femmycycle had failed regulatory audits after the due diligence period of the sale transaction, and Femmycyle had a “deficient record keeping system.” The court determined that “Shihata and Femcap intended to deceive Petty and Excellus by concealing these facts [and] as a result of the concealed facts Excellus was harmed in the amount of $1,150,000.”

The court found that “[a]t no time during the due diligence period did Petty or Excellus learn of MDSAP audits of the Femmycycle product.” The court determined that such “audits went directly to the failures of Femcap’s management and record keeping.” The court concluded that “Shihata and Femcap clearly knew of the audits and knew that the audits presented real problems for Femcap to be able to continue to manufacture the Femmycycle cup product.” At trial when asked as to why there was no follow-up “Shihata claimed it was a ‘business decision.’” FemCap’s own regulatory compliance consultant further testified acknowledging that the concealed audits, “show that the quality management assistant did not have product traceability and product identification and preservation among other issues – that were deficient.” Femcap’s own employee and Operations Manager, testified that when she began working for Femcap in mid-2019, “Femcap did not have a single digital process in place … and no invoices were stored anywhere.” Femcap’s Operation Manager also confirmed that she deleted pertinent emails from May 2019 to August 2019 relating to the Femmycycle product, including communications with distributors and customers and informed Shihata of the practice. Following the testimony of Femcap’s compliance expert and Femcap’s employee the court determined, “by overwhelming evidence that Shibata and FemCap concealed material information from Petty and Excellus … and had the omitted information been disclosed Excellus would not have purchased Femmycycle.”

“When we made the decision to buy FemmyCycle, we thought it was the beginning of the next chapter in our lives together. In no way could we have foreseen the future, as the last three years have been an absolute nightmare. Outside of the financial damage caused to us, our friends, and our family, the mental and emotional toll this has taken on the two of us will never be fully repairable.” Christopher Petty stated while reflecting on the case.

When asked for her comment, Monica Chinisaz, Christopher’s fiancé and co-owner of Excellus stated: “We are pleased to finally receive a positive ruling after three years of litigation. However, we remain unable to recuperate the extensive resources – time, money, and energy – spent on litigation and trying to keep the business afloat since October 2019. We can never get that back. This was a fraudulent scheme orchestrated by a medical professional who is active in the San Diego medical community. We’re shocked by the extreme measures taken by Shihata and the FemCap team to defraud us with virtually no accountability or remorse. We can only hope to pick up the pieces and begin to rebuild our lives as we continue to pursue what is rightfully owed.”

Excellus was represented by Orange County trial attorney and principal of Thakur Law Firm, APC, Pamela Tahim Thakur. She states: “We could not be more delighted to have achieved this victory for our clients who genuinely deserve justice. Proving fraud to obtain rescission is a rare occurrence due to the high standards required to prove fraud,” said Thakur.

Following Judge Frazier’s verdict, FemCap and Shihata have yet to pay any of the monies due to Excellus. The ruling from Judge Frazier included a constructive trust in favor of Excellus and against Shihata for $1.15 million dollars and ordered the return of the purchase price to Excellus within 20 days of the entry of the Court’s agreement. Shihata failed to comply with the Court’s order.

It was recently discovered that right after the trial concluded, Shihata transferred or sold his company FemCap to a third party right before the judgement was entered to avoid payment to Excellus. Shihata has also informed Excellus of his plans to file both personal and business bankruptcy.

“Achieving justice has been the driving force in this case, and it is the commitment of Thakur Law Firm in all matters,” said Thakur. She continues: “We’ve done everything we can, and it’s been a long process. It would be devastating to come this far only to have Shihata escape accountability by avoiding payment of this judgment.”

The case is captioned FEMCAP, INC. and Alfred Shihata v. Excellus Holdings, LLC, San Diego County Court Case No. 37-2020-00015382-CU-BC-CTL.

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