DATATRAK International Inc. seeks shareholder approval for the two proposed partial settlement agreements to the lawsuit involving its former CEO, directors and activist investors related to the events surrounding its twice-postponed Nov. 11, 2015, annual shareholder meeting.
The parties involved include DATATRAK's former CEO Laurence Birch, former directors James Karis, Timothy Biro, Jerome Kaiser, Nicholas Loiacono and Andrew Pitler, as well as activist investor and current board Chairman Alex Tabatabai and Arosa Investment Management LLC, now known as Tabatabai Investment Management LLC.
Previously on Nov. 10, 2015, Birch, Biro, Karis, Kaiser and Loiacono indefinitely postponed DATATRAK's Nov. 11, 2015, annual meeting and filed a lawsuit against Arosa. Additionally, the directors voted for the addition of Pitler as the sixth director.
The lawsuit accused Arosa's party of tortious interference, fraudulent misrepresentation and civil conspiracy arising from a number of alleged improprieties in connection with Arosa's proxy contest involving three seats on DATATRAK's board.
Arosa submitted a counterclaim and third-party complaint on Nov. 25, 2015, with claims related to the annual meeting's postponement, Pitler's appointment and Birch, Biro, Karis, Kaiser and Loiacono's conduct in the proxy contest. It claimed that if the shareholder vote had taken place as originally scheduled, the most recent vote tallies available indicated that Arosa's slate would have won the election.
Following Birch's termination for cause on Feb. 24, 2016, Birch filed file a counterclaim against the company, Arosa and Tabatabai. He claimed that he was not appropriately terminated for cause by the company and accused DATATRAK of breach of contract and indemnification. He also accused Arosa and Tabatabai of intentional interference with contractual relations, tortious interference, defamation, invasion of privacy, unfair competition/unfair commercial practices, abuse of process and civil conspiracy.
The first proposed settlement agreement, submitted for court approval March 25, 2016, involves all parties except Birch. It provides for Kaiser, Karis and Pitler's resignation from DATATRAK's board and the dismissal of claims asserted by the parties.
The second proposed settlement agreement, dated Jan. 27, involves DATATRAK, Birch and Arosa, addressing the dismissal of claims and issues not included in the first settlement. It also provides for a $260,000 payment by DATATRAK to Birch in exchange for the return of 19,438 shares of restricted stock to the company.
In addition to shareholder approval, the proposed settlement agreements are also pending court approval. The court will hold a final hearing on the approval of the proposed settlements June 2.