Item 3. Legal Proceedings
Item 3. Legal Proceedings
On
October 13, 2021, the United States District Court for the District of New Jersey consolidated into In re CorMedix Inc. Securities
Litigation , Case No. 2:21-cv014020-JXN-CLW, two putative class action lawsuits filed on or about July 22, 2021 and September 13,
2021, respectively, and appointed lead counsel and lead plaintiff, a purported stockholder of the Company. The lead plaintiff filed a
consolidated amended class action complaint on December 14, 2021, alleging violations of Sections 10(b) and 20(a) of the Exchange Act,
along with Rule 10b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933. On October 10, 2022, the lead plaintiff
filed a second amended consolidated complaint that superseded the original complaints in In re CorMedix Securities Litigation. In
the second amended complaint, the lead plaintiff seeks to represent two classes of shareholders: (i) shareholders who purchased or otherwise
acquired CorMedix securities between October 16, 2019 and August 8, 2022, inclusive; and (ii) shareholders who purchased CorMedix securities
pursuant or traceable to the Company’s November 27, 2020 offering pursuant to CorMedix’s Form S-3 Registration Statement,
its Prospectus Supplement, dated November 27, 2020, and its Prospectus Supplement, dated August 12, 2021. The second amended complaint
names as defendants the Company and twelve (12) current and former directors and officers of CorMedix, namely Khoso Baluch, Robert Cook,
Matthew David, Phoebe Mounts, John L. Armstrong, and Joseph Todisco (the “Officer Defendants” and collectively with CorMedix,
the “CorMedix Defendants”) as well as Janet Dillione, Myron Kaplan, Alan W. Dunton, Steven Lefkowitz, Paulo F. Costa, Greg
Duncan (the “Director Defendants”). The second amended complaint alleges that the CorMedix Defendants violated Section 10(b)
of the Exchange Act (and Rule 10b-5), the Officer Defendants violated Section 20(a), the Director Defendants, CorMedix, Baluch, and David
violated Section 11 of the Securities Act, and that the Director Defendants, Baluch, and David violated Section 15. In general, the purported
bases for these claims are allegedly false and misleading statements and omissions related to the NDA submissions to the FDA for DefenCath,
subsequent complete response letters, as well as communications from the FDA related and directed to the Company’s contract manufacturing
organization and heparin supplier. The Company intends to vigorously contest such claims. The Company and the other Defendants filed
their motion to dismiss the second amended complaint on November 23, 2022; the lead plaintiff filed his opposition to the Defendants’
motions to dismiss on January 7, 2023; and Defendants filed their reply brief on February 6, 2023.
On
or about October 13, 2021, a purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled Voter v. Baluch, et al. , Case No. 2:21-cv-18493-JXN-LDW
(the “Derivative Litigation”). The complaint names as defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan,
Steven Lefkowitz, Paulo F. Costa, Greg Duncan, Matthew David, and Phoebe Mounts along with the Company as Nominal Defendant. The
complaint alleges breaches of fiduciary duties, abuse of control, and waste of corporate assets against the defendants and a claim for
contribution for purported violations of Sections 10(b) and 21D of the Exchange Act against certain defendants. The individual defendants
intend to vigorously contest such claims. On January 21, 2022, pursuant to a stipulation between the parties, the Court entered an order
staying the case while the motion to dismiss the class action lawsuit described in the foregoing paragraph is pending. The stay may be
terminated before the motion to dismiss is resolved according to certain circumstances described in the stipulation available on the
Court’s public docket. The case was administratively terminated on March 16, 2022 while the stay is pending.
On
or about January 13, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled DeSalvo v. Costa, et al. , Case No. 2:23-cv-00150-JXN-CLW.
Defendants Paulo F. Costa, Janet D. Dillione, Greg Duncan, Alan Dunton, Myron Kaplan, Steven Lefkowitz, Joseph Todisco, Khoso Baluch,
Robert Cook, Matthew David, Phoebe Mounts, and John L. Armstrong along with the Company as Nominal Defendant. The complaint alleges breaches
of fiduciary duty and unjust enrichment against the individual defendants. The individual defendants intend to vigorously contest such
claims. The case is in the early stages.
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On
or about January 25, 2023, another purported shareholder, derivatively and on behalf of the Company, filed a shareholder derivative complaint
in the United States District Court for the District of New Jersey, in a case entitled Scullion v. Baluch, et al. , Case No. 2:23-cv-00406-ES-ESK.
Defendants Khoso Baluch, Janet Dillione, Alan W. Dunton, Myron Kaplan, Steven Lefkowitz, Paulo F. Costa, Gregory Duncan, Matthew David,
and Phoebe Mounts, along with the Company as Nominal Defendant. The complaint alleges breaches of fiduciary duties. The individual defendants
intend to vigorously contest such claims. The case is also in the early stages.
On
or about June 23, 2022, the Company’s Board received a letter demanding it investigate and pursue causes of action, purportedly
on behalf of Company, against certain current and former directors, officers, and/or other employees of the Company (the “Letter”),
which the Board believes are duplicative of the claims already asserted in the Derivative Litigation. As set forth in the Board’s
response to the Letter, the Board will consider the Letter at an appropriate time, as circumstances warrant, as it continues to monitor
the progress of the Derivative Litigation.
On
September 9, 2014, we filed in the District Court of Mannheim, Germany a patent infringement action against TauroPharm GmbH and Tauro-Implant
GmbH as well as their respective CEOs, referred to as the Defendants claiming infringement of ND Partners, LLC’s European Patent
EP 1 814 562 B1, for which we have an exclusive license, and which was granted by the EPO on January 8, 2014 (the "Prosl European
Patent"). The Prosl European Patent covers a low dose heparin catheter lock solution for maintaining patency and preventing infection
in a hemodialysis catheter. In this action, we claim that the Defendants infringe on the Prosl European Patent by offering, putting on
the market, using, importing and possessing for the aforementioned purposes, as well as by offering to supply and supplying catheter
locking solutions to the extent they are covered by the claims of the Prosl European Patent. We are seeking injunctive relief and raising
claims for information, rendering of accounts, calling back, destruction and determination of damages. Separately, TauroPharm has filed
an opposition with the EPO against the Prosl European Patent alleging that it lacks novelty and inventive step and that it is not patentable
but relates to methods for treatment of the human body.
In
the same complaint against the same Defendants, we also alleged an infringement (requesting the same remedies, plus damages for costs
of a warning letter) of ND Partners, LLC’s utility model DE 20 2005 022 124 U1, for which we have an exclusive license, and which
is referred to as the "Utility Model", which we believe is fundamentally identical to the Prosl European Patent in its main
aspects and claims. The Court separated the two proceedings and the Prosl European Patent (docket number 7 O 118/14) and the Utility
Model (docket number 7 O 2/15) claims were tried separately. TauroPharm GmbH has filed a cancellation action against the Utility Model
before the German Patent and Trademark Office (the "German PTO") based on essentially the similar arguments as those in the
opposition against the Prosl European Patent.
The
District Court of Mannheim issued its decisions on May 8, 2015, staying both proceedings. In its decisions, the Court found that the
TauroLock catheter lock solutions TauroLockHep100 and TauroLockHep500 infringe both certain claims of the Prosl European Patent and the
Utility Model and further that there is no prior use right that would allow the Defendants to continue to make, offer, use or sell its
product in Germany. However, the Court declined to issue an injunction in favor of us that would preclude the continued commercialization
by TauroPharm and the other Defendants, based upon its finding that there is a sufficient likelihood that the EPO, in the case of the
Prosl European Patent, or the German PTO, in the case of the Utility Model, may find that such patent or utility model is invalid. Specifically,
the Court noted the possible publication of certain instructions for product use that may be deemed to constitute prior art. As such,
the District Court determined that it will defer any consideration of the request by us for injunctive and other relief until such time
as the EPO or the German PTO made a final decision on the underlying validity of the Prosl European Patent and the Utility Model.
Oral
proceedings before the Opposition Division at the EPO were held on November 25, 2015, at which the three-judge patent examiner panel
considered arguments related to the validity of the Prosl European Patent. The hearing was adjourned due to the fact that the panel was
of the view that Claus Herdeis, one of the managing directors of TauroPharm, had to be heard as a witness in a further hearing in order
to close some gaps in the documentation presented by TauroPharm as regards the publication of prior art.
The
German PTO held a hearing in the validity proceedings relating to the Utility Model on June 29, 2016, at which the panel affirmed its
preliminary finding that the Utility Model was invalid based upon prior publication of a reference to the benefits that may be associated
with adding heparin to a taurolidine based solution. We filed an appeal against the ruling on September 7, 2016. An oral hearing was
held on September 17, 2019 in which the German Federal Patent Court affirmed the first instance decision that the Utility Model was invalid.
The decision has only a declaratory effect, as the Utility Model had expired in November 2015. On April 28, 2020, we filed a withdrawal
of the complaint on the German utility model, thereby waiving our claims on these proceedings. The proceedings were closed and during
the year ended December 31, 2020, final reimbursement of approximately $30,000 for the costs in connection with the utility model infringement
were paid to TauroPharm .
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On
November 22, 2017, the EPO in Munich, Germany held a further oral hearing in this matter. At the hearing, the panel held that the Prosl
European Patent would be invalidated because it did not meet the requirements of novelty based on a technical aspect of the European
intellectual property law. We disagree with this decision and have appealed the decision. In a hearing on October 27, 2022 before the
EPO Board of Appeals, the Board held that the patent claims of the Prosl European Patent on file were not inventive over prior art presented
by TauroPharm. We thus withdrew our appeal against the first instance decision. This means that the invalidation of the patent has become
final and that, as a consequence, the infringement proceedings, which are formally still ongoing, will also be closed because there is
no underlying patent anymore. In view of the invalidation of the Prosl European Patent, on November 9, 2022, the Defendants requested
the infringement proceedings (docket number 7 O 118/14) to be resumed and to dismiss our infringement action. In order
to avoid a dismissal, on January 12, 2023, we withdrew the infringement action with prejudice. The Defendants consented to the withdrawal
on February 2, 2023 and requested that we, as plaintiff, bear the costs of the proceedings. Given that pursuant to statutory law, a plaintiff
that withdraws an action, has to bear the costs of the proceedings, we put the decision on who has to bear the costs in the District
Court of Mannheim’s discretion. Due to the withdrawal, there will be no decision on the merits, however, the District Court of
Mannheim will issue a decision that we have to bear the cost of the proceedings. Given that the court fees have already been paid by
us, the cost of the proceedings are the costs that will have to be reimbursed to the Defendants, i.e., mainly statutory attorney's fees
and expenses.
On
January 16, 2015, we filed a complaint against TauroPharm GmbH and its managing directors in the District Court of Cologne, Germany.
In the complaint, we allege violation of the German Unfair Competition Act by TauroPharm for the unauthorized use of our proprietary
information obtained in confidence by TauroPharm. We allege that TauroPharm is improperly and unfairly using our proprietary information
relating to the composition and manufacture of Neutrolin, in the manufacture and sale of TauroPharm’s products TauroLockTM, TauroLock-HEP100
and TauroLock-HEP500. We seek a cease and desist order against TauroPharm from continuing to manufacture and sell any product containing
taurolidine (the API of Neutrolin) and citric acid in addition to possible other components, damages for any sales in the past and the
removal of all such products from the market. An initial hearing in the District Court of Cologne, Germany was held on November 19, 2015
to consider our claims. On January 14, 2016, the Court issued an interim decision in the form of a court order outlining several issues
of concern that relate primarily to the court's interest in clarifying the facts and reviewing any and all available documentation, in
particular with regard to the question which specific know-how was provided to TauroPharm by whom and when. A further oral hearing in
this matter was held on November 15, 2016. In this hearing, the Court heard arguments from CorMedix and TauroPharm concerning the allegations
of unfair competition. On March 7, 2017, the Court issued another interim decision in the form of a court order outlining again several
issues relating to the argumentation of both sides in the proceedings. Both parties have submitted further writs in this matter and the
Court had scheduled a further hearing for May 8, 2018. After having been rescheduled several times, the hearing took place on November
20, 2018. A decision was rendered by the Court on December 11, 2018, dismissing the complaint in its entirety. We have appealed this
decision in January 2019 and filed our grounds of appeal in March 2019. An oral hearing was held on September 6, 2019 in which our legal
counsel brought forward further arguments for the fact that the manufacturing process of the respective catheter locking solution is
indeed protectable as a trade secret. In view of these new arguments, the Court issued an evidentiary order on September 27, 2019 ordering
an expert opinion. The expert opinion was not in our favor, but we have filed a response to the expert opinion in reaction to which the
Court asked the expert to supplement his opinion to address the issues brought forward in our submission. In the supplementary expert
opinion, the expert confirmed his view. In an oral hearing held on June 18, 2021, the Court only heard from the expert, and the Court,
as well as both parties, asked further questions to the expert around his expert opinion. At the end of the hearing and internal deliberation
among the panel of judges, the Court indicated that it would dismiss our complaint, if we did not withdraw the appeal. As there were
no advantages to further pursuing the matter in view of the Court’s statements, we withdrew the appeal and the proceedings are
therefore now closed. TauroPharm requested an increase of the value in dispute determined by the Court in order to receive a higher reimbursement
of costs (as this is based on the value in dispute under German law) but the request was rejected in view of arguments brought forward
against it by our legal counsel. We reimbursed costs in the amount of approximately $41,000 plus interest to TauroPharm.
Item 4. Mine Safety Disclosures
Not
applicable.
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PART
II