OPKO Health, Inc. v. Lipsius

• Decision Date: 11 September 2019
• Docket Number: 3D19-841,Nos. 3D19-840,s. 3D19-840
• Citation: 279 So.3d 787
• Parties: OPKO HEALTH, INC., et al., Petitioners, v. Frank LIPSIUS, etc., and Louis T. Alexander, etc., Respondents.
• Court: Florida District Court of Appeals

279 So.3d 787

OPKO HEALTH, INC., et al., Petitioners,

v.Frank LIPSIUS, etc., and Louis T. Alexander, etc., Respondents.

Nos. 3D19-840

3D19-841

District Court of Appeal of Florida, Third District.

Opinion filed September 11, 2019

Akerman LLP, and Gerald B. Cope, Jr. ; King & Spalding LLP, and Rebeca M. Ojeda (Atlanta, GA), for petitioners.

Hernandez Lee Martinez, LLC, and Eric A. Hernandez and Jermaine A. Lee ; The Weiser Law Firm, P.C., and James M. Ficaro and Brett D. Stecker (Berwyn, PA); RM Law PC, and Richard A. Maniskas (Berwyn, PA), for respondents.

Before SALTER, MILLER, and GORDO, JJ.

ON MOTION FOR REHEARING

GORDO, J.

Upon considering Respondents' Motion for Rehearing, this Court withdraws its previous opinion filed June 19, 2019, and substitutes the following opinion in its place:

FACTUAL & PROCEDURAL BACKGROUND

OPKO Health, Inc. ("OPKO"), petitions this Court for certiorari review of the trial court's order denying their motion to stay proceedings in Lipsius v. Frost, and Alexander v. Frost.¹ The undisputed facts are set out as follows by the lower court in its Order on Defendants' Motion to Dismiss, and/or Stay the Case:²

On September 7, 2018, the U.S. Securities and Exchange Commission ("SEC") filed a complaint against OPKO, the Company's Chief Executive Officer ("CEO") and Chairman of the Board of Directors (the "Board"), defendant Frost, and a myriad of others, alleging that these defendants participated in an elaborate "pump and dump" insider stock selling scheme, netting Frost and his co-conspirators millions of dollars (the "SEC Action"). The SEC Action alleged that Frost and his associates executed a scheme whereby they used Frost's reputation as a successful healthcare investor in order to artificially inflate the stock prices of companies in which they had invested, and then liquidated their own positions in those stocks. After the filing of the SEC Action, OPKO's stock price tumbled by nearly 30% and trading in OPKO stock was temporarily halted.

On December 27, 2018, the Company announced the settlement of the SEC Action. In connection with the settlement, the Company announced that it had "agreed to an injunction from certain violations of the Securities Exchange Act of 1934 (the "Exchange Act"); a $100,000 penalty; and will perform certain undertakings related to the Exchange Act." Defendant Frost, meanwhile, agreed "to injunctions from certain violations of the Securities Act of 1933 and the Exchange Act; approximately $5.5 million in penalty, disgorgement, and prejudgment interest; and a prohibition, with certain exceptions, from trading in penny stocks."

Following the SEC Action, multiple federal securities class actions and derivative actions were filed in federal and state courts. The first action initiated in Florida, Steinberg v. OPKO Health, Inc. ("Federal Securities Action"), was filed on September 14, 2018, in the Southern District of Florida.³ This class action suit was brought on behalf of a class of OPKO investors alleging that OPKO, Frost and other officers made false or misleading statements and failed to disclose alleged market manipulation at issue in the SEC Action.

On September 27, 2018, the first of the Florida derivative suits was filed in the Circuit Court for the Eleventh Judicial Circuit of Florida by Frank Lipsius, on behalf of OPKO, seeking damages caused by a breach of fiduciary duties by OPKO's directors. Service was not perfected until November 9, 2018. Meanwhile, on November 2, 2018, Louis Alexander filed an almost identical derivative complaint in the Florida circuit court. The Florida derivative suits allege the OPKO directors breached their fiduciary duties by allegedly allowing there to be misstatements and misrepresentations made in OPKO's SEC filings and failing to disclose their involvement in the "pump and dump" scheme.

Additionally, multiple derivative suits were filed in Delaware court. Tunick v. Frost ("Delaware Derivative Action"), the first Delaware derivative suit,⁴ was filed on October 15, 2018, in the Delaware Supreme Court. Service was perfected on October 23, 2018.

Petitioners filed a motion in the Florida circuit court to dismiss, or, in the alternative, to stay Lipsius and Alexander pending the resolution of the Federal Securities Action and the Delaware Derivative Action. Petitioners asserted that comity principles dictate that the derivative suits should follow, rather than precede, the direct suits involving substantially similar parties and claims. Petitioners argued a stay is warranted because the derivative actions seek relief that is contingent on the outcome of the related litigation. Petitioners further contended it would be prejudicial and impractical for OPKO to simultaneously defend against the federal securities class actions while also contesting derivative claims based on the same core allegations. Petitioners also asserted that allowing the Florida derivative suits to proceed at the same time as the Federal Securities Action would force OPKO to litigate inconsistent positions at the same time. Upon resolution of the Federal Securities Action, Petitioners sought a stay pending resolution of the Delaware Derivative Action arguing Delaware has a stronger interest in adjudicating cases involving Delaware companies and Delaware law.

Respondents argued that the Federal Securities Action involves distinct causes of action, names only some of the same individuals as defendants and therefore does not preclude recovery in the derivative suits. Respondents contended a stay would cause the derivative suits to remain unresolved for years and would still have to be litigated after resolution of the Federal Securities Action. Respondents conceded there was a slight overlap of issues and that both the Federal Securities Action and the Florida derivative suits stemmed from the SEC action and involved most of the same facts. Yet, Respondents proposed coordinating discovery for overlapping issues and maintained a stay should be denied.

During the hearing on the motion to stay, the trial court heard extensive legal argument regarding which case should be allowed to proceed first. The court recognized these actions created a "hodgepodge of legal conflict because of how many jurisdictions all these cases have fallen into." Nonetheless, the lower court denied the motion finding that the principle of priority in Florida dictated that a stay in favor of the Delaware Derivative Action be denied. Notably, the lower court did not apply this principle to determine whether a stay was warranted pending resolution of the Federal Securities Action. Rather, the trial court reasoned there was insufficient evidence that the resolution of the Federal Securities Action would resolve many of the issues in the derivative suits. These petitions followed.

STANDARD OF REVIEW

Certiorari review is warranted when the petitioning parties demonstrate the contested order constitutes "(1) a departure from the essential requirements of the law, (2) resulting in material injury for the remainder of the case[,] (3) that cannot be corrected on postjudgment appeal." Bd. of Trs. of Internal Improvement Trust Fund v. Am. Educ. Enters., LLC, 99 So. 3d 450, 454 (Fla. 2012) (quoting Reeves v. Fleetwood Homes of Fla., Inc., 889 So. 2d 812, 822 (Fla. 2004) ).

LEGAL ANALYSIS

"Although a trial court has broad discretion to order or refuse a stay of an action pending before it, it is nonetheless an abuse of discretion to refuse to stay a subsequently filed state court action in favor of a previously filed federal action which involves the same parties and the same or substantially similar issues. This rule is based on principles of comity." Fla. Crushed Stone Co. v. Travelers Indem. Co., 632 So. 2d 217, 220 (Fla. 5th DCA 1994) (citations omitted). Comity principles dictate that "[w]here a state and federal court have concurrent jurisdiction over the same parties or privies and the same subject matter, the tribunal where jurisdiction first attaches retains jurisdiction." Shooster v. BT Orlando Ltd. P'ship, 766 So. 2d 1114, 1115 (Fla. 5th DCA 2000) (citing Wade v. Clower, 94 Fla. 817, 114 So. 548, 551 (Fla. 1927) ). "It is well-settled that when a previously filed federal action is pending between substantially the same parties on substantially the same issues, a subsequently filed state action should be stayed pending the disposition of the federal action." Beckford v. Gen. Motors Corp., 919 So. 2d 612, 613 (Fla. 3d DCA 2006) (citing Wade, 94 Fla. 817, 114 So. 548 ; Oviedo v. Ventura Music Grp., 797 So. 2d 634 (Fla. 3d DCA 2001) ).

"Florida law is clear that, ‘the causes of action do not have to be identical ... [i]t is sufficient that the two actions involve a single set of facts and that resolution of the one case will resolve many of the issues involved in the subsequently filed case.’ " Pilevsky v. Morgans Hotel Grp. Mgmt., LLC, 961 So. 2d 1032, 1035 (Fla. 3d DCA 2007) (quoting Fla. Crushed Stone Co., 632 So. 2d at 220 ). Here, Respondents concede the derivative actions stem from the same nucleus of facts as the pending Federal Securities Action. Moreover, the Florida actions involve many of the same parties as the Federal Securities Action, including: OPKO Health, Inc., Phillip Frost, Adam Logal, and Juan F. Rodriguez. Respondents even acknowledge the actions have overlapping issues and that it would preserve judicial resources to coordinate discovery.

A stay is warranted where the verdict and judgment in the Federal Securities Action is likely to "materially affect the viability of some of the [Petitioners'] claims in the Florida lawsuit," or lead to inconsistent outcomes. Benihana of Tokyo, Inc. v. Benihana, Inc., 129 So. 3d 1153, 1155 (Fla. 3d DCA 2014). This Court has previously granted certiorari for a lower court's failure to stay proceedings where jurisdiction attached in a concurrent jurisdiction involving substantially similar parties and issues, subjecting Petitioner to "duplication of...