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Item 3. Legal Proceedings

2022-03-01 compared with 2021-02-18 · 50 added, 48 removed, 69 unchanged (59% of the section changed)

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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.

As previously disclosed, on September 7, 2018, the 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.

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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.

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 provided for the settlement of and release of the class action claims for an aggregate of $16.5 million, a significant portion of which was paid into escrow by our insurance carriers.

The settlement was approved on December 15, 2020.

Additional information on the class action lawsuits is provided below.

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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.

Specific information relating to each lawsuit was previously disclosed and 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

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.

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 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, 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.

The Steinberg Lawsuit sought to declare the action to be a class action, monetary damages, 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.

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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.

The class action was settled on December 15, 2020 for $16.5 million.

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 Sharon Claim sought 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.

class action lawsuit was settled, and the damages granted in that settlement are for both NASDAQ and TASE class members (the “ Sharon Settlement Agreement”), Sharon filed a motion and request that the Court order the TASE to provide the information required to allow distribution of payment to TASE class members, in accordance with the Sharon Settlement Agreement.

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.

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.

The Avraham Claim alleged 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 sought to declare the action to be a class action and an estimated NIS 20 million (approximately USD $6.1 million) in damages.

On June 24, 2021, the Court granted the parties' joint motion to withdraw and dismissed the case, subject to the payment of NIS 45,000 (approximately USD $14,200) to the plaintiff's counsel and certain other minor payments, which the Company has paid.

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.

The Yu Lawsuit 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 any other relief the Court might have deemed 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,

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.

Demetriades 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 any other relief the Court might have deemed 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”).

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.

Lipsius 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 any other relief the Court might have deemed 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.

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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.

The Alexander Lawsuit 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 any other relief the Court might have deemed 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.

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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.

Lee 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 any other relief as Court might have deemed just and proper.

The action was dismissed sua sponte by the Judge for failure to state a claim.

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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

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.

The Sobieski King Lawsuit 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 any other relief the Court might have deemed 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”).

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.

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, 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 any other relief the Court might have deemed just and proper.

Following the Settlement, the Wendt Lawsuit was dismissed with prejudice on December 18, 2020.

Davydov 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 relief as the Court might have deemed 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.

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.

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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.

As previously reported, BioReference receives and is routinely required to respond to Civil Investigative Demands (“CID”) in the ordinary course of business.

On November 26, 2019, BioReference received a CID from the U.S.

Department of Justice (“DOJ”).

The CID states that DOJ is investigating whether BioReference paid unlawful remuneration to health care practitioners in violation of the Anti-Kickback Statute or Stark law and thus submitted or caused to be submitted false claims to government health care programs in violation of the False Claims Act.

The time period covered by DOJ’s requests is January 1, 2011 through November 26, 2019.

BioReference has fully cooperated with the DOJ by submitting the requested information and making current employees available for interviews, and DOJ recently made a presentation to BioReference regarding its position.

The parties have reached verbal agreement on the settlement amount, which is anticipated to be approximately $10 million, excluding attorney fees.

On March 1, 2019, the Company received a Civil Investigative Demand (“CID”) from the U.S.

Department of Justice, Washington, DC.

The CID sets forth document requests and interrogatories in connection with allegations that the Company and certain of its affiliates violated the False Claims Act and/or the Anti-Kickback Statute.

On January 13, 2022, the Federal Government notified the U.S.D.C., Middle District Florida, Jacksonville Division, that it is declining to intervene in the matter but retains the right, via the Attorney General, to consent to any proposed dismals of the action by the Court.

On February 9, 2022, the States of Florida, Georgia, and Commonwealth of Massachusetts notified the U.S.D.C., Middle District Florida, Jacksonville Division, that they are declining to intervene in the matter.

Notwithstanding the above declinations, on February 17, 2022, the Company was served with the Relator’s Summons and Complaint (“Complaint”), which had been previously sealed.

The complaint alleges violations of the False Claims Act, the California Fraud Preventions Act, the Florida False Claims Act, the Massachusetts False Claims Act, the Georgia False Medicaid Claims Act, and illegal kickbacks.

The Company is reviewing and assessing the allegations made in the Complaint and, at this point, has not determined whether there is any merit to these claims nor can it determine the extent of any potential liability.

While management cannot predict the outcome of these matters at this time, the ultimate outcome could be material to our business, financial condition, results of operations, and cash flows.

On April 8, 2019, MabVax Therapeutics Holdings, Inc.

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and such other legal and equitable relief as the Court may deem proper under the circumstances.

The Company, Dr.

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 January 31, 2022, plaintiffs entered into a confidential mutual release and settlement agreement with the Company, Dr.

Frost, Frost Gamma Investment Trust, and Steve Rubin (the “Settlement Agreement”).

The Settlement Agreement is subject to the approval of United States Bankruptcy Court for the District of Delaware.

On April 5, 2019, former shareholders of Claros Diagnostics, Inc.

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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,

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.

A Stipulation of Dismissal With Prejudice was filed with the Court on February 8, 2021.

MINE SAFETY DISCLOSURES.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings