Caselaw

Derivative Claim (Tel Aviv) 43264-02-17 Appeal Financial Case – Supreme Court Moran Meiri v. Israel Football Association - part 14

October 27, 2020
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The Applicants added that the Committee did not hear relevant parties; that it has made a decision that is in line with the statement of the chairman of the association regarding the purpose of its establishment; and that there are concerns about Adv. Taubman's conflict of interest, as well as the structural bias of the committee members in favor of the conclusion that a lawsuit should not be filed. It was also argued that the generous salary ceiling set by the Association for the members of the committee should be taken into account, and the fact that Adv. Taubman asked to receive a salary increase beyond this amount, and it is not clear whether his request was granted.

  1. In reference to The Committee's Conclusions, it was argued that the standard of judicial review that began with respect to them was one of "meticulous examination and excessive intervention". This is because the committee was established after a full judicial proceeding, and when the full picture is already before the court.

The Applicants claimed that the Committee erred in deciding to deduct the amount of damages in the sum of NIS 7.5 million, contrary to the Sol Report and a series of documents (including documents in which Respondents 2-4 documented the prohibited transfers). The committee also erred in its conclusion regarding the extent of the damage: it set the chances of the claim at an amount of NIS 5 million that was not explained by it, it did not include a calculation of linkage and interest differences, and it did not include an estimate of future collection.

According to the applicants' approach, the committee erred when it twice reduced the collection estimate of NIS 4 million, and moreover, there is no basis for the majority estimate of the committee with respect to the collection of NIS 12.5 million, when the maximum that can be collected is only NIS 10 million. This "reduced" sum also assumes a theoretical and unrealistic possibility, whereby none of the teams that agreed to "donate" money will be relegated or disbanded. Therefore, the real amount is much lower.

  1. With regard to the manner in which the alleged damage should be improved, the majority opinion was of the opinion that it should be collected from the Premier League and the National League teams – instead of its claim from respondents 2-4. However, according to the applicants, the recommendation to act in this way is baseless and contrary to the position of the Association's legal advisor, Adv. Pines, before the committee, as well as to the opinion of the Association's legal advisor since 2014, Adv. Ephraim Barak. The question of whether the association is authorized to forcibly collect money from the teams is a legal question that is subject to the court's discretion. Therefore, and since even according to the majority approach of the committee, damage of NIS 5 million remains, the derivative claim must be approved with respect to at least this amount. It was further argued that there is a reason for the defect in the fact that, on the one hand, the majority position rejected offers for payment from various parties such as insurance because they were too low – and on the other hand, it ruled that funds should be deducted from the groups.

Moreover, the majority opinion gave great weight to the concern about third-party notices that may be submitted against other members of the Association's management beyond respondents 2-4. According to the applicants, first, at the current stage of the hearing, it is no longer possible to submit third-party notices; Second, if there are indeed other members of the management who are responsible for the Association's damages, there is no justification for taking action to avoid filing a lawsuit against them; and thirdly, the claims against respondents 2-4 attribute to them direct liability for the Association's damages, while the claims against the other members of the management attribute to them only indirect liability. The consideration regarding the possibility of filing third-party notices against the soccer teams is also not a consideration that should have been taken into account.

  1. The Applicants further clarified that giving weight to the consideration regarding the concern about third-party notices means that members of the management who took part in the discussion in which it was decided to adopt the majority position in the Claims Committee were in a conflict of interest. This is because this position is actually intended to protect them.

The Applicants noted that the majority opinion gave great weight to the desire to refrain from "bringing up the issue once again". However, the weight given to this interest attests to the difficulty of relying on the majority opinion, since it expresses a bias in favor of the person who elected the committee. According to the applicants, it is precisely the "burial of the affair" that will harm the Association, its reputation and the ability of groups to trust it and its corporate governance.

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