A multimillion-dollar legal battle has reignited as FS Medical Supplies LLC escalates claims that Tanner Pharma Group secretly cut it out of a $1.25 billion deal with the U.K. government for COVID-19 test kits.

FS Medical filed a fresh complaint Tuesday in North Carolina federal court, reinforcing allegations already made in an ongoing lawsuit in the same district. At stake: $387 million in lost profits that FS Medical says Tanner Pharma wrongfully kept by covertly securing an exclusive contract.

Jurisdiction Battle Could Upend Litigation

The new filing comes as Tanner Pharma and its executives—founder Banks Bourne and shareholder Molly Bourne—seek to dismiss the initial lawsuit. Their argument? A recently discovered legal technicality.

Tanner Pharma claims that one of FS Medical’s owners was a Chinese citizen, which, under federal diversity laws, could void the court’s jurisdiction. FS Medical says it only learned of this issue last week and has since transferred ownership to a U.S. citizen—but not before Tanner Pharma attempted to get the case thrown out.

Anticipating that the original lawsuit could be dismissed on procedural grounds, FS Medical launched the new complaint to keep its claims alive.

"The defendants will vigorously oppose that attempt," said Robert W. Fuller of Robinson Bradshaw & Hinson PA, counsel for the Bournes, vowing to hold FS Medical responsible for the alleged misstep.

A scheduled hearing before a North Carolina magistrate judge was abruptly canceled, pending resolution of the jurisdiction dispute.

A Pandemic-Era Partnership Turned Sour

According to the complaint, FS Medical was formed in 2020 to help source personal protective equipment during the peak of the COVID-19 pandemic. The company partnered with Tanner Pharma, a North Carolina-based medical distributor, and its U.K. subsidiary, Tanner Pharma UK.

Two key contracts were at the heart of their partnership:

1. A non-circumvention agreement—Tanner Pharma pledged it would not bypass FS Medical when dealing with suppliers FS Medical had secured.
2. A revenue-sharing agreement—FS Medical would source products, and Tanner Pharma would pay FS Medical half of all profits earned from sales.

But instead of honoring those agreements, FS Medical claims, Tanner Pharma orchestrated a secretive, multimillion-dollar scheme.

Allegations of Deception and a Stolen Deal

FS Medical says it introduced Tanner Pharma to Zhejiang Orient Gene Biotech Co. Ltd., a Chinese manufacturer of antigen test kits. The plan was simple: FS Medical would source the tests, Tanner Pharma would distribute them, and both would split the profits.

"But FSMS’s trust was misplaced," the lawsuit states.

Instead, the complaint alleges, Tanner Pharma cut FS Medical out of the equation, secretly negotiating with Orient Gene behind closed doors. Tanner Pharma then:

• Issued purchase orders directly to Orient Gene, leaving FS Medical in the dark.
• Secured a confidential exclusive distribution agreement with Orient Gene, locking FS Medical out of future sales.
• Sold over $1.25 billion in test kits to the U.K. government without paying FS Medical a dime.

The lawsuit describes Tanner Pharma’s behavior as “immoral, unethical, unscrupulous, and deceptive.”

Tanner Pharma’s Leadership Under Scrutiny

The lawsuit paints Banks Bourne as the mastermind behind the scheme, asserting that he controlled Tanner Pharma both personally and through his childhood friend, Steve Scalia, who serves as the company's president.

Scalia’s name does not appear as a defendant, but FS Medical’s lawsuit highlights his past legal troubles—noting that he previously pleaded guilty to securities fraud in California. Scalia and his brother were sentenced in 2011 for insider trading involving the biotech firm Sequenom Inc.

FS Medical alleges it negotiated directly with Scalia to structure the original distribution deal, only to later discover it had been manipulated and shut out.

Legal Teams Gear Up for Courtroom Showdown

FS Medical is represented by Arnold & Porter Kaye Scholer LLP and Maynard Nexsen PC, while Tanner Pharma and its executives are backed by powerhouse attorneys from McGuireWoods LLP and Robinson Bradshaw & Hinson PA.

With both lawsuits now hanging in the balance, the stakes remain sky-high in this $387 million legal battle—one that could redefine the ethics of pharmaceutical distribution during the COVID-19 pandemic.