State professional agencies find no reason to oppose a compromise settlement in the derivative proceeding against a Teva officeholder in the Copaxone bribery case, deputy district attorney for Tel Aviv Adv. Liav Weinbaum stated a in short notice to the Tel Aviv District Court.
Following the $519 million that Teva had to pay the US authorities in the Copaxone bribery affair and the NIS 75 million it had to pay the Israeli Ministry of Justice in the same affair, a precedent-setting court petition was filed in which a Teva shareholder demanded that Teva should provide him with the necessary documents for the purpose of filing a derivative action against the company. Despite the very preliminary stage of the proceeding, Teva hurriedly set up an independent claims committee headed by Adv. Aaron Michaeli from the Goldfarb Seligman law firm. The committee found that the claim had little chance of success, but that it was nevertheless best for the company to reach a settlement with the shareholder.
In accordance with the committee's recommendation and the ensuing negotiations, Teva and the public shareholder, represented by Adv. Amit Manor and Adv. Yuki Shemesh, announced two months ago that they had reached a compromise.
Under the settlement, which still requires approval by Judge Khaled Kabub, the insurance companies of the Teva company officers against whom the shareholder sought to file a derivative lawsuit will pay $50 million in exchange for final and absolute removal of all claims by the company against its officers and directors in connection with the bribery affair.
The compromise submitted for Kabub's approval does not specify for which of the officers serving during the relevant period the insurers will pay. At the request of the insurers, a clause in the settlement states that the company will bear the officers' future defense costs if any further proceedings are instituted against them. As mentioned, the settlement was reached at a very early stage of the proceedings, before the request for approval of a derivative lawsuit was filed and without it being clear which Teva officers during the relevant period the shareholder wanted to sue. The agreement sets the legal fees for the lawyers who represented the shareholder at $1.6 million.
Despite a number of assessments that the Attorney General, whose opinion is legally required before any compromise in class action and derivative proceedings can be reached, would oppose a settlement, the short notice issued by the Ministry of Justice merely made a number of points concerning the settlement and did not oppose it.
The Ministry of Justice stated, "It can be argued that the result of the settlement, in which the company will be responsible for defending the officers in the event of a future proceeding against them in the affair for which the derivative lawsuit was filed, involves a difficulty." The Ministry Justice added, however, "If the court finds that in this case, exceptional and special circumstances existed in this case justifying the indemnification conditions in the settlement, it may not be unreasonable to refrain from intervention in the considerations of the company and the independent committee."
Concerning the legal fees agreed on by the parties, a question that is frequently viewed critically by the Attorney General, the Ministry of Justice wrote, "It appears that the requested legal fees meet the criteria established in judicial rulings, but on the high side. It should be kept in mind that the sum is fairly high considering the efforts made by the lawyer in the proceeding. For this reason, the Ministry of Justice leaves the judgment on the legal fees to the court."
A number of public shareholders have already stated that they intend to oppose the settlement that was reached. Kabub will have to weight their objections and comments filed in connection with the settlement, and he has the power to demand that the parties should make changes in the settlement before he approves it.
Published by Globes, Israel business news - en.globes.co.il - on October 7, 2019
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