DATATRAK International, Inc., Timothy G. Biro, James M. Karis, Jerome H. Kaiser, Nicholas A. Loiacono, Tabatabai Investment Management LLC (f/k/a Arosa Investment Management LLC) and Alex Tabatabai Seek Court Approval of Proposed Settlement

Former DATATRAK Chairman Laurence P. Birch is not a Party to the Settlement; Deadline for Shareholders to Object to Proposed Settlement and Dismissal of Claims is March 16, 2016

07 Mar, 2016, 17:03 ET from DATATRAK International, Inc.

CLEVELAND, March 7, 2016 /PRNewswire/ -- Pursuant to Ohio Rule of Civil Procedure 23.1 DATATRAK International, Inc. (OTCQX: DTRK), Timothy G. Biro, James M. Karis, Jerome H. Kaiser, Nicholas A. Loiacono and Andrew T. Pitler (collectively the "Released DATATRAK Parties") on the one hand, and Tabatabai Investment Management LLC (f/k/a Arosa Investment Management LLC and Alex Tabatabai (collectively "Arosa") (collectively the "Settling Parties") on the other, hereby provide notice to DATATRAK Shareholders of a proposed partial settlement of DATATRAK International, Inc. v. Arosa Investment Management, LLC, et al., Cuyahoga County Court of Common Pleas Case No. CV-15-854059, currently being considered for final approval by the Honorable Michael E. Jackson (the "Proposed Settlement").  The Proposed Settlement does not include former DATATRAK Chairman Laurence P. Birch, and the claims asserted by Arosa against Mr. Birch survive the Proposed Settlement. 

Background of the Dispute and Claims Asserted

On November 10, 2015, Defendants Birch, Biro, Karis, Kaiser and Loiacono indefinitely postponed DATATRAK's November 11, 2015 Annual Shareholder Meeting.  On November 10, 2015, DATATRAK initiated this action against Arosa, alleging claims 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 the DATATRAK Board of Directors.  As of November 10, 2015, DATATRAK's board had five members, so a victory in the proxy contest would have given Arosa a majority of three out of five directors on DATATRAK's board.

After postponing the November 11 Annual Meeting, Defendants Birch, Biro, Karis, Kaiser and Loiacono added a sixth director to DATATRAK's board by appointing defendant Pitler.  Thus, if Arosa was successful in its proxy contest, its slate of three directors would not constitute a majority of the board members, as it would have had the November 11 Annual Meeting proceeded as scheduled and Arosa's slate prevailed at that election.

On November 25, 2015, in its original Counterclaim and Third-Party Complaint, Arosa filed a number of direct and derivative claims against Defendant Birch and the Released DATATRAK Parties stemming from the postponement of the Annual Meeting, the appointment of Defendant Pitler to the board of directors, and their conduct in the proxy contest, alleging that if the shareholder vote had taken place on November 11 as originally scheduled, the most recent vote tallies available indicated that Arosa's slate would have won the election. 

On December 21, 2015, the Released DATATRAK Parties and Birch filed a partial motion to dismiss Counts I and II of the original Counterclaim and Third-Party Complaint.  In response, Arosa amended its claims on December 28, 2015.  Through its December 28 Amended Counterclaim and Third Party Complaint, Arosa asserted the following derivative claims: a) Count I for Declaratory Judgment against DATATRAK, Birch, Biro, Karis, Kaiser, Loiacono and Pitler; b) Count II for Breach of Fiduciary Duty against Birch, Biro, Kaiser, Karis and Loiacono; and c) Count III for Corporate Waste & Gross Mismanagement against Birch, Biro, Kaiser, Karis, Loiacono and Pitler. Arosa and Tabatabai also brought Counts I and II in their individual capacities, and asserted a direct cause of action against DATATRAK and Birch (Count IV) in their individual capacity only, not derivatively.  All causes of action asserted by Arosa in its individual capacity against the Released DATATRAK Parties are also being dismissed with prejudice as part of the Settlement Agreement.  As previously stated, the claims asserted against Defendant Birch are not being released or dismissed.

The Proposed Settlement

After Arosa filed the Amended Counterclaim and Third Party Complaint, and over Arosa's objection, the Released DATATRAK Parties and Birch postponed the Annual Meeting two more times -- first to December 30, 2015 and then to January 8, 2016.  At the January 8 Annual Meeting, Arosa's slate prevailed in the proxy contest by a margin of more than 250,000 shares with roughly 62% of the votes.  Following the election, Arosa and the Released DATATRAK Parties promptly commenced settlement discussions in an effort to avoid further litigation expenses.

As a result of these discussions, Defendants Kaiser, Karis and Pitler have resigned from the DATATRAK board of directors upon execution of the Settlement Agreement, and Arosa has provided a release and now seeks approval of a dismissal with prejudice of the claims asserted against them and the other Released DATATRAK Parties, as described more fully in the Settlement Agreement.  These resignations give the remaining DATATRAK Directors, each elected as part of Arosa's slate at the January 8, 2016 election, a majority of seats on the DATATRAK Board, which Arosa contends would have been the result if the election had proceeded on November 11, 2015 as originally scheduled.

Due to the derivative nature of the claims asserted against the Released DATATRAK Parties, Ohio Rule of Civil Procedure 23.1 requires Court approval of any dismissal of those claims and that notice of the proposed dismissal be given to the shareholders.  Specifically, Rule 23.1 states that a derivative "action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal shall be given to shareholders in such a manner as the court directs." 

Request for Court Approval of Settlement and Deadline for Shareholders to Object

In keeping with the requirements of Civ.R. 23.1, Arosa and the Released DATATRAK Parties have requested that Judge Jackson approve the Settlement Agreement and the proposed dismissal with prejudice of the derivative claims asserted against the Released DATATRAK Parties.  Because the resignations of Kaiser, Karis and Pitler will make Arosa's slate a majority of the DATATRAK board, which Arosa contends fulfills the will of the shareholders in a manner consistent with the result of the November 11, 2015 vote if it had been allowed to proceed as scheduled, Arosa does not believe that maintenance of the derivative action against the Released DATATRAK Parties and the accompanying litigation costs for DATATRAK are warranted under the circumstances.

Any DATATRAK Shareholder wishing to object to the terms of the Proposed Settlement must provide such objections to Judge Jackson no later than March 16, 2016.

About DATATRAK
DATATRAK International is a worldwide technology and services company delivering Unified dClinical solutions and related services for the clinical trials industry. DATATRAK offers a comprehensive solution on a single, unified platform. The Company delivers a complete portfolio of software products designed to accelerate the collection, analysis and submission of clinical trials. The DATATRAK ONE® software solution, deployed worldwide supports Phase I – Phase IV drug and device studies in multiple languages throughout the world. For more information, visit http://www.datatrak.com.

Except for the historical information contained in this press release, the statements made in this release are forward-looking statements. These forward-looking statements are made based on management's expectations, assumptions, estimates and current beliefs concerning the operations, future results and prospects of the Company and are subject to uncertainties and factors which are difficult to predict and, in many instances, are beyond the control of the Company, and which could cause actual results to differ materially from those contemplated in these forward-looking statements. For a list of certain factors that may cause actual results to differ materially from those contemplated in these forward looking statements, please see the Company's report filed with the OTCQX Market on March 13, 2015 announcing its results for the full year period ended December 31, 2014. The Company undertakes no obligation to update publicly or revise any forward-looking statement whether as a result of new information, future events or otherwise.

SOURCE DATATRAK International, Inc.



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