Item 3. Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS.
We are involved from time to time in various claims and legal actions arising in the ordinary course of business.
As previously disclosed, on September 7, 2018, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the Southern District of New York (the “SEC Complaint” or “SEC Lawsuit”) against a number of individuals and entities, including the Company and its CEO and Chairman, Phillip Frost (“Dr. Frost”), alleging violations of securities laws. The Company entered into a settlement agreement with the SEC on December 27, 2018, pursuant to which, without admitting or denying any of the allegations of the SEC Complaint, the Company is enjoined from violating Section 13(d) of the Exchange Act and paid a $100,000 penalty.
Following the SEC’s announcement of the SEC Complaint, a number of class actions and derivative suits were filed concerning the allegations in the SEC Complaint and related matters. On June 26, 2020, The Amitim Funds, the lead plaintiff in the class action lawsuits filed a Stipulation of Settlement in the Southern District of Florida of behalf of itself and the remainder of the class, which, if approved, will provide for the settlement of and release of the class action claims for an aggregate of $16.5 million, a significant portion of which has been paid into escrow by our insurance carriers. On September 4, 2020, an Order Preliminarily Approving Settlement was entered and a settlement hearing was held on December 15, 2020. We are awaiting the Court’s final order approving the settlement. Additional information on the class action lawsuits is provided below.
On November 2, 2020, the derivative suit was settled in the Delaware Chancery Court for an aggregate amount of $3.1 million (the “Settlement”). Several derivative lawsuits that were filed in Florida State and federal courts were stayed pending the resolution of the Delaware derivative action and all of those matters have now been dismissed. The specific information relating to each lawsuit is provided below.
On or about September 12, 2018, Jason Kerznowski (“Kerznowski”), a purported stockholder, filed a putative class action lawsuit in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Kerznowski Lawsuit”). This lawsuit was brought by Kerznowski both individually and on behalf of a putative class of the Company’s stockholders, claiming that in connection with the facts and circumstances
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underlying the allegations in the SEC Complaint, the Company engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The Kerznowski Lawsuit sought to declare the action to be a class action and certify Kerznowski as the class representative, monetary damages, including prejudgment and post judgment interest, an award of reasonable attorneys’ fees, expert fees, and other costs, and such other relief as the Court may deem just and proper.
On or about September 14, 2018, Charles Steinberg (“Steinberg”), a purported stockholder, filed a putative class action lawsuit in the United States District Court for the Southern District of Florida against the Company and certain of its current and former executive officers (the “Steinberg Lawsuit”). This lawsuit was brought by Steinberg both individually and on behalf of a putative class of the Company’s stockholders claiming that in connection with the facts and circumstances underlying the allegations in the SEC Complaint, the Company engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The Steinberg Lawsuit sought to declare the action to be a class action, monetary damages, including prejudgment and post judgment interest, an award of reasonable attorneys’ fees and expert fees and other costs, and such additional or different relief as the interests of law or equity may require.
On February 4, 2019, the United States District Court for the District of New Jersey appointed the Amitim Funds as lead plaintiff in the Kerznowski Lawsuit and subsequently transferred the matter to the United States District Court for the Southern District of Florida. Amitim Funds was also appointed as lead plaintiff in the Steinberg Lawsuit. On May 3, 2019, plaintiffs in each of the Kerznowski Lawsuit and Steinberg Lawsuit, filed an identical consolidated class action complaint, and the Court consolidated these actions on May 8, 2019. On May 29, 2020, the parties informed the Court they had reached a settlement in principle, settling the class action suit for $16.5 million, subject to certain terms and conditions, and the Court issued an Order on Notice of Settlement denying all pending motions as moot and administratively closing the case. On September 4, 2020, an Order Preliminarily Approving Settlement was entered and a settlement hearing was held on December 15, 2020. We are awaiting the Court’s final order approving the settlement.
On or about September 13, 2018, Idan Sharon filed an Application for Approval of a Class Action in the Tel Aviv Israel District Court against the Company and certain of its current and former executive officers, and certain members of its Board of Directors (the “Sharon Claim”). This application was filed by a purported stockholder, both individually and on behalf of a putative class of the Company’s stockholders, claiming that in connection with the facts and circumstances underlying the allegations in the SEC Complaint, the Company engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The Sharon Claim seeks both to declare the action a class action and monetary damages. The Court closed this case pending resolution of the U.S.-based class actions relating to the allegations in the SEC Complaint. The Court has ordered plaintiff’s counsel to update the court with respect to whether there has been a ruling in the U.S. class action matter by February 17, 2021.
On or about September 16, 2018, Dalia Avraham filed an Application for Approval of a Class Action in the Tel Aviv Israel District Court against the Company and Dr. Frost. This application was filed by a purported stockholder, both individually and on behalf of a putative class of the Company’s stockholders (the “Avraham Claim”). The Avraham Claim alleges a negligent and/or deliberate act related to the trade of the Company’s shares on the Tel Aviv Stock Exchange (“TASE”) which was intended to or which in fact caused damage to the Company’s investors based on the Company’s decision to delist from TASE in April 2018 and its subsequent decision to continue to be listed on TASE. The Avraham Claim seeks to declare the action to be a class action and an estimated NIS 20 million (approximately USD $6.1 million) in damages. The parties have been asked to submit dates for a hearing on a motion to dismiss. We believe that this action is without merit and the Company intends to vigorously defend itself.
On October 2, 2018 Andy Yu (“Yu”), a purported stockholder, filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida against the Company as a nominal defendant, certain of the Company’s current and former executive officers, certain current and former members of its Board of Directors, and Frost Gamma Investments Trust (the “Yu Lawsuit”). The Yu Lawsuit alleged violations of the federal securities laws based on alleged false and misleading statements of material fact or omissions, breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, and unjust enrichment. Yu sought to maintain the action on behalf of the Company, alleging that he was a proper and adequate representative of the Company, and also sought to direct the Company to improve its corporate governance and internal procedures, monetary damages, restitution, an award of reasonable attorneys’ fees and expert fees and other costs, and such additional or different relief as the Court may deem just and proper. Following the Settlement, the Yu Lawsuit was dismissed with prejudice on January 13, 2021.
On October 31, 2018, Lisette Demetriades (“Demetriades”), a purported stockholder, filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida against the Company as a nominal defendant, certain of the Company’s current and former executive officers, certain current and former members of its Board of Directors,
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and Frost Gamma Investment Trust (the “Demetriades Lawsuit”). The Demetriades Lawsuit alleged violations of the federal securities laws based on alleged false and misleading statements of material fact or omissions, breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, and unjust enrichment. Demetriades sought to maintain the action on behalf of the Company, and alleged that he was a proper and adequate representative of the Company, and also sought to direct the Company to improve its corporate governance and internal procedures, monetary damages, restitution, an award of reasonable attorneys’ fees and expert fees and other costs, and such additional or different relief as the Court may deem just and proper. Following the Settlement, a Joint Stipulation for Dismissal with Prejudice was filed on January 5, 2021 and the Demetriades Lawsuit was dismissed.
On September 27, 2018, Frank Lipsius (“Lipsius”), a purported stockholder, filed a shareholder derivative complaint in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida against the Company as a nominal defendant, certain of the Company’s current and former executive officers, and members of its Board of Directors (the “Lipsius Lawsuit”). This lawsuit was brought by Lipsius and alleged breach of fiduciary duty against the officers and directors named therein, based on the allegations raised by the SEC in the SEC Lawsuit that the Company made misleading statements, and based on a purported failure to maintain proper internal controls. Lipsius sought to maintain the action on behalf of the Company, alleged that he is a proper and adequate representative of the Company, and also sought to direct the Company to improve its corporate governance and internal procedures, monetary damages, restitution, an award of reasonable attorneys’ fees and expert fees and other costs, and such additional or different relief as the Court may deem just and proper. Following the Settlement, a Joint Stipulation for Dismissal with Prejudice was filed on December 18, 2020 and the Lipsius Lawsuit was dismissed.
On or about November 2, 2018, Louis T. Alexander (“Alexander”), a purported stockholder, filed a shareholder derivative complaint in the Circuit Court of the Eleventh Judicial Circuit of Florida serving Miami-Dade County against the Company, as a nominal defendant, Dr. Frost, certain current and former members of the Company’s Board of Directors and executive officers (the “Alexander Lawsuit”). This lawsuit alleged breach of fiduciary duty against the officers and directors named therein, based on the allegations raised by the SEC in the SEC Lawsuit that the Company made misleading statements, and based on a purported failure to maintain proper internal controls. Alexander sought to maintain the action on behalf of the Company, alleged that he was a proper and adequate representative of the Company, and also sought to direct the Company to improve its corporate governance and internal procedures, monetary damages, restitution, an award of reasonable attorneys’ fees, and experts’ fees, and other costs, and such other and further relief as the Court deems just and proper. Following the Settlement, a Joint Stipulation for Dismissal with Prejudice was filed on December 21, 2020 and the Alexander Lawsuit was dismissed.
On January 28, 2019, Robert Davydov (“Davydov”), a purported stockholder, filed a shareholder derivative complaint in the Circuit Court of the Eleventh Judicial Circuit of Florida serving Miami-Dade County against the Company as a nominal defendant and the certain members of its Board of Directors (the “Davydov Lawsuit”). The Davydov Lawsuit alleged breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, breach of the duties of care, loyalty and good faith, corporate waste and unjust enrichment. Davydov sought to maintain the action on behalf of the Company, alleged that he was a proper and adequate representative of the Company, and also sought a declaration that the defendants breached their fiduciary duties, an award of monetary damages, restitution, an award of reasonable attorneys’ fees and expert witness fees and other costs, and such other and further equitable relief as the Court deems just and proper. Following the Settlement, a Joint Stipulation for Dismissal with Prejudice was filed on December 15, 2020 and the Davydov Lawsuit was dismissed.
On November 14, 2018, Sammy Lee (“Lee”), a purported stockholder, filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida against the Company as a nominal defendant, Dr. Frost, Frost Gamma Investments Trust, an entity controlled by Dr. Frost, and certain of the Company’s current and former executive officers, and current and former members of its Board of Directors (the “Lee Lawsuit”). The Lee Lawsuit alleged violations of the federal securities laws based on alleged false and misleading statements of material fact or omissions, breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, and unjust enrichment. Lee sought to maintain the action on behalf of the Company, alleged that he was a proper and adequate representative of the Company, and sought to direct the Company to improve its corporate governance and internal procedures, monetary damages, restitution, an award of reasonable attorneys’ fees and expert fees and other costs, and such other and further relief as the Court may deem just and proper. The action was dismissed sua sponte by the Judge for failure to state a claim. An amended complaint was filed on November 30, 2018. Following the Settlement, a Joint Stipulation for Dismissal with Prejudice was filed and the Lee Lawsuit was dismissed on January 11, 2021.
On December 17, 2018, Thaddeus R. Sobieski and Donnis W. King, purported stockholders of the Company, filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida against the Company as a nominal defendant, Dr. Frost, Frost Gamma Investments Trust, and certain of the Company’s current and former executive officers, and current and former members of its Board of Directors (the “Sobieski King Lawsuit”). The Sobieski King Lawsuit
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alleged breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, violations of the federal securities laws based on alleged false and misleading statements of material fact or omissions, unjust enrichment, and waste of corporate assets. The lawsuit sought to declare that the action was a proper derivative action, a declaration that defendants breached their fiduciary duties, monetary damages, current and former directors to remit all salaries and other compensation received during the period of alleged breach of fiduciary duties, to have the Company improve its corporate governance and internal procedures, an award of pre-judgement and post- judgement interest, reasonable attorneys’ fees, experts’ fees, costs and expenses, and such other and further relief as the Court may deem just and proper. Following the Settlement, the Sobieski King Lawsuit was dismissed with prejudice on January 7, 2021.
On December 31, 2018, Connie Wendt (“Wendt”), a purported stockholder, filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida against the Company as a nominal defendant, certain of its current and former executive officers, certain current and former members of its Board of Directors, Frost Gamma Investments Trust, and certain other individuals and an entity named in the SEC Complaint (the “Wendt Lawsuit”). The Wendt Lawsuit alleged breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, breach of duty of loyalty, breach of fiduciary duty for insider selling and misappropriation of information, unjust enrichment, and violations of the federal securities laws. Wendt sought to maintain the action on behalf of the Company, alleged that she was a proper and adequate representative of the Company, and sought a declaration that each of the Company’s named officers and directors breached their fiduciary duties to the Company, monetary damages, disgorgement of alleged profits, an award of costs and disbursements including reasonable attorneys’ fees, accountants’ and experts’ fees and costs and expenses, and such other and further relief as the Court deems just and proper. Following the Settlement, the Wendt Lawsuit was dismissed with prejudice on December 18, 2020.
Between October 2018 and January 2019, five shareholder derivative complaints were filed by purported stockholders in the Delaware Court of Chancery against the Company as a nominal defendant, Dr. Frost and the Company’s Board of Directors. In the first quarter of 2019, the five lawsuits were consolidated into In re OPKO Health, Inc. Derivative Action , Case No. 2018-0740-SG (the “Consolidated Delaware Action”). On February 11, 2019, a Verified Consolidated Derivative Complaint was filed in the Consolidated Delaware Action, and Richard Tunick, Jamie Gewirtz, Emily Gewirtz Stiebel, Esther Susan Lutzker and Ivan Pawlenko were named as Co-Lead Plaintiffs in the filing. The Consolidated Derivative Complaint alleged breach of fiduciary duty based on the allegations raised by the SEC in the SEC Complaint, and breach of the duty of loyalty. The lead plaintiffs sought to declare the action a proper derivative action, monetary damages, disgorgement of all remuneration during the relevant time period, to direct the Company to improve its internal controls, equitable and injunctive relief, pre- and post-judgment interest, an award of reasonable attorneys’ fees and expert fees, and such other and further relief as the Court deemed just and proper. The Settlement was approved on November 2, 2020.
On April 8, 2019, MabVax Therapeutics Holdings, Inc. filed a lawsuit in the Superior Court of California, County of San Diego against a number of individuals and entities, including the Company, Dr. Frost, Steven Rubin, the Company’s Executive Vice President-Administration, and an entity affiliated with Dr. Frost, based on the allegations raised in the SEC Complaint. The lawsuit seeks an award for actual and punitive damages, pre- and post-judgment interest; that the defendants be required to make full disclosure and accounting of their interests and transactions in plaintiff’s securities; costs of the suit, and reasonable attorney’s fees; and such other legal and equitable relief as the Court may deem proper under the circumstances. The Company, Dr. Frost, Mr. Rubin and the Frost-affiliated entity have filed a motion to quash the complaint for lack of personal jurisdiction, which remains pending. The Company believes the allegations against the Company, Dr. Frost and Mr. Rubin are without merit and intends to vigorously defend against the claims.
On April 5, 2019, former shareholders of Claros Diagnostics, Inc. filed a complaint in the Chancery Court of Delaware against the Company, alleging among other things, that the Company breached the Agreement and Plan of Merger dated October 13, 2011 by and among the Company, Claros Merger Subsidiary, LLC and Claros Diagnostics, Inc. (the “Merger Agreement”): (i) by failing to make a milestone payment of $2.375 million (payable in OPKO Common Stock) upon obtaining FDA approval of the Claros PSA test; and (ii) by repudiating its obligations to make additional future milestone payments as required under the Merger Agreement. In January 2021, the Company and the shareholder representative entered into a settlement agreement providing, among other things, that it pay the shareholders $1.1875 million, which amount is equal to half the initial milestone payable under the Merger Agreement. A Stipulation of Dismissal With Prejudice has been filed with the Court.
On or about February 3, 2021 BioReference received correspondence from the US Department of Labor (“US DOL”) stating that it would be conducting a Wage and Hour investigation for the Genpath division for the span of 2019 and 2020 and was seeking records related to same including gross sales, employee roster information, comprehensive payroll and time-log records, and 1099 forms and contract records for independent contractors and subcontractors. On February 15, 2021, BioReference received a Subpoena from the NJ Department of Labor (“NJ DOL”) seeking similar information for the time time period as the US DOL inquiry for BioReference, as well as information related to unemployment and disability taxes,
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workmen’s compensation, and records related to earned sick leave, and financial information. It is uncertain at this time whether the two matters are interrelated and the Company can express no opinion as to the likelihood of an unfavorable outcome or range of potential loss regarding this matter. BioReference is currently gathering the requested information.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II