Civil Case (Center) 38712-06-23 Coover Agencies Ltd. v. Pitkit-Printing Factories Ltd. - part 2

The plaintiff's arguments

25. As of the end of December 2021, thanks to the plaintiff's brokerage activities, negotiations were held between Unima and the interested parties in Pitkit for the purchase of Pitkit by Unima. The business opportunity to acquire Pitkit was a very attractive opportunity, which was not known in the market.
26. The negotiations progressed greatly, until they ran aground in July 2022. Shahar and Piron - two officers and shareholders of Unima, who were very involved in the negotiations, decided to take advantage of the business opportunity to acquire Pitkit and within a very short time, in September 2022, they acquired Pitkit, through a new company they established - Liberty, together with Shahar's partner and other partners, in a deal very similar to the deal planned between Unima and Pitkit.
27. As it appears from the evidence presented, in addition to being a director and shareholder of Unima, Piron also served as Unima's legal advisor.
28. Contrary to Shahar's claim, Shahar was aware from the beginning of the Unima brokerage agreement and the amount of brokerage fees set in it.
29. In addition, Matan, the developer and controlling shareholder of Unima, testified that he knew about a pitkit brokerage agreement from the initial stage. The plaintiff does not need to go through any position or interest in Unima and make sure that he knows about a brokerage agreement in a handwriting. Moreover, contrary to their claims, Shahar and Piron personally knew about a Pitkit brokerage agreement.
30. The claim that the Unima brokerage agreement was not officially ratified by the Unima Board of Directors should be rejected. A company's approval of its entrepreneurial activities can be done implicitly by receiving benefits and using services, as happened in this case.
31. Haimi acted on behalf of and on behalf of the plaintiff to promote the transaction with Pitkit and Yonima. From a legal point of view, it can be said that the plaintiff also carried out the brokerage activities through another means, in accordance with the provisions of section 40 of the Contracts (General Part) Law, 5733-1973 (hereinafter: the "Contracts Law"). Unima knew about the commercial agreement between Haimi and the plaintiff.
32. The plaintiff was an "effective factor" in the transaction between Pitkit and Unima. Haimi participated on behalf of the plaintiff in a number of meetings, which included a tour of the factory and a one-on-one meeting with the stakeholders in Pitkit in order to "prepare the hearts", following which the first memorandum of understanding was signed. Even after the signing of the first memorandum of understanding, the plaintiff assisted in the negotiations and her involvement was important to its success.  Unima adopted the plaintiff's proposals, and as a result, the second memorandum of understanding was signed.  In addition, when disagreements arose between Unima and Nitkit, Unima sought the assistance of the plaintiff, through Katz and Haimi, who worked to schedule a meeting, in which a request was made by Unima to extend the timetables for the transaction, or to grant approval for financing the purchase through a non-bank entity.
33. Shahar and Piron, who understood the attractive business opportunity that the plaintiff brought to Unima, did not let this opportunity slip away from them. In the first stage, Shahar tried to get his partner, Shira Dollar, to invest in the transaction in cooperation with Unima, but after the Unima board of directors made it clear that the directors were not allowed to purchase Pitkit themselves, Shahar and Piron approached the stakeholders in Pitkit behind Unima's back, in order to persuade them not to accede to Unima's requests.
34. After Unita's requests were rejected, and Pitkit and its stakeholders announced the cancellation of the second memorandum of understanding, Piron acted immediately to dissolve Unima, and immediately negotiations began between Pitkit and Liberty, led by Shahar and Firon.
35. These negotiations continued from the point where the previous negotiations with Unima ended, and the total amount of consideration (ILS 45 million) did not change. Shahar's claim that these were new and separate negotiations was not proven. As it appears from the evidence presented, Firon copied the request for documents sent by M.  Firon's office on behalf of Unima and sent it back to Pitkit.
36. The claim of deduction raised by Piron should be rejected. His claim for the existence of an oral agreement with Katz is based on the testimony of a single litigant, which has no assistance, is unreliable, and does not meet the test of logic. Even if the agreement had been proven, Firon explicitly denied that it was his agreement with the plaintiff, and claimed that it was his agreement with Katz.  In addition, Firon declared that he would waive the brokerage fees if he was part of the acquiring company, and since he was part of the acquiring company (Liberty), he is not entitled to brokerage fees in any case.
37. In our case, the conditions set out in the case law are met, which indicate the degree of efficiency of a broker in a negotiated transaction. The consistent rulings of the courts require defendants who tried to take advantage of the difference between the person who signed a brokerage agreement and the one who benefited from the brokerage, to pay the broker his salary.
38. The defendants are also liable by virtue of the cause of action for breach of contract. Clause 3 of the Unima brokerage agreement establishes a duty to maintain confidentiality, prohibit the use and prohibit the transfer of information, while Shahar and Firon, officers of Unima, caused Unima to breach the brokerage agreement by using the information that Unima received from the plaintiff and from Vitit during the negotiations and transferring it to Liberty and its shareholders. Liberty, through the actions of Shachar and Piron, also caused Yonima to breach the duty of confidentiality.  Liberty is liable for this tort by virtue of Sections 12-14 of the Torts Ordinance [New Version] (hereinafter: the "Torts Ordinance") even if the acts of Shachar and Piron were committed before its establishment, since it approved them in its conduct and also shared, authorized and ratified them after the fact.
39. The defendants must also be obligated by virtue of the laws of unjust enrichment. Liberty acquired Pitkit, contrary to a legal right, on the basis of information it received about the business opportunity to acquire Pitkit and about Pitkit, thus saving itself the payment of brokerage fees.  Shahar and Piron received their shares in Liberty at rates of 10% and 3% (respectively), which it held in Pitkit, which is valued, at least ILS 45 million, without paying anything for them, since they brought the deal to Liberty.
40. The defendants are also liable by virtue of the tort of theft of a trade secret. The information regarding the business opportunity for the acquisition of Pitkit is business information, which is not in the public domain and cannot be easily disclosed, the confidentiality of which gives the plaintiff a business advantage over its competitors. In addition, Haimi's acquaintance with Pitkit brought the plaintiff unique knowledge about the value of Pitkit and about the sellers (the interested parties in Pitkit) and their personal intentions, which were not known to potential buyers.  The defendants took the trade secret and made use of it, in contravention of the provision of section 6(b) of the Commercial Torts Law, 5759-1999 (hereinafter: the "Commercial Torts Law").  In our case, the presumption of use established in sections 10(1) and 10(2) of the Commercial Torts Law is also applied.
41. They must also be obligated by virtue of the laws of good faith and by virtue of the principle that "the sinner shall not be rewarded." Firon is also liable by virtue of his commitment to the plaintiff that she will receive the brokerage fees due to her.
42. If the defendants had not taken and made use of the information regarding the business opportunity to acquire Pitkit, unlawfully, while making a fortune and not in a lawsuit, causing a breach of contract, theft of a trade secret and a breach of the duty of good faith, the plaintiff could have brokered the transaction to another third party and received appropriate brokerage fees, which Liberty saved.
43. A brokerage fee of 4% is a decent salary. The plaintiff bases this on the Unima brokerage agreement, other Unima brokerage agreements, which were disclosed in the course of the evidentiary hearings, which stand at similar rates and even higher than 4%, the opinion of the expert on its behalf (Shalom Sofer), and the sample of transactions for comparison he made therein. The expert opinion on behalf of the defendants (Prof.  Hadas Glander) is unfounded and relates to an outdated formula that is not relevant to the facts of the case.

Liberty and Shachar Claims (Defendants 4-5)

44. In order to prove eligibility for brokerage fees, it must be shown that a binding brokerage agreement was signed, and that the broker was the effective factor that led to the engagement. In our case, there is no dispute that in the Liberty transaction there is no brokerage agreement between the plaintiff (or Katz) and Liberty. In addition, there is no dispute that the plaintiff (or Katz) was not the effective factor that led to the signing of the Liberty deal, in light of Katz's admission that he was not involved in this transaction and did not even know about the existence of Liberty.
45. Knowing this, the plaintiff tried to build on the narrative of "stealing the transaction", but failed to do so as well. In addition to the heavy burden imposed on her to prove this argument, which was not raised, she must prove that there was a brokerage agreement in the Pitkit-Unima transaction, which binds Unima, and that the rate of the appropriate brokerage fees in the circumstances is at the rate claimed, but the plaintiff did not meet the burden of proof imposed on her.
46. The Unima Brokerage Agreement was signed prior to its incorporation and was never ratified or adopted by Unima.
47. Firon confirmed that he had not informed Unima officials (other than Matan) about the drafting of a Unima brokerage agreement, and that Shahar himself did not know the plaintiff and Katz at that stage, and did not know about the existence of the brokerage agreement.
48. Matan's signature on his own, on his own, of a UNIMA brokerage agreement, cannot bind Unima to the extent that it was not ratified retroactively in accordance with Section 12(a) of the Companies Law, 5759-1999 (hereinafter: the "Companies Law"). Even when Unima was established, it is not enough to sign Matan, but it is necessary to have the joint signature of two authorized persons. Therefore, Matan acted with complete lack of authority.  Anyone who engages with an entrepreneur assumes the risk that his hopes of perfecting the contract will not come true.  In this situation, the plaintiff should be attributed contributory fault at a rate of 100%.
49. Even in the Unima transaction, the plaintiff did not meet the conditions of the "effective factor" that led to the realization of the (failed) transaction. Katz himself did not communicate, initiate, or accompany him, did not visit the Pitkit factory even once, did not attend the negotiation meetings, did not speak with any of the parties and did not advise them. Another party, Haimi, who was presented as a worker on behalf of Pitkit, was claimed in retrospect that he acted on behalf of the plaintiff.
50. The negotiations between Unima and Pitkit failed, for reasons unrelated to Liberty and Shahar. It was proven that Unima did not have the equity to carry out the transaction, and that Matan approached non-bank entities and put them in the confidential information room. This conduct led to a complete loss of confidence on the part of Pitkit, which canceled the second memorandum of understanding.  Shahar did everything in his power to save the Unima deal.  Only after negotiations failed the negotiations, and after Shahar found himself threatened with personal lawsuits by Pitkit, was he forced to resign and sever ties with Unima.  The claim that Shahar tried to coax the stakeholders in Pitkit not to respond to Matan in order to secure himself the deal is inconsistent with the evidence and the truth.
51. The plaintiff played a "double game" and concealed from Yonima the agreement with Pitkit and the lower rate of brokerage fees included in it. This conduct constitutes a serious breach of the duties of loyalty and fairness imposed on a realtor, who must disclose to his client the existence of a personal interest (Section 10 of the Real Estate Brokers Law, 5756-1996 (hereinafter: the "Realtors Law"), which also applies to business brokerage) and a breach of the duty of good faith in negotiations.
52. The Liberty deal was a new transaction, born on new ground, with two different legal entities and different shareholders, and under different commercial terms (a cash payment of ILS 35 million compared to a payment of ILS 45 million in the distribution of payments and bank guarantees in the Unima-Pitkit deal).
53. The plaintiff is also not entitled to proper wages. It has not invested efforts in the Liberty deal and cannot benefit from the efforts in the Unima deal.
54. The cross-examination of the expert on behalf of the plaintiff, Shalom Sofer, CPA, revealed a shaky, unprofessional opinion, lacking a reliable factual basis, based on a biased sample and irrelevant or unsubstantiated data. In addition, CPA Sofer ignored the fact that the plaintiff agreed to a brokerage fee of 2.25% with Pitkit in the Unima deal.
55. On the other hand, the opinion of Prof. Hadas Glander, the expert on behalf of the defendants, is backed by an in-depth analysis and is based on a consistent and well-founded methodology.   Glander concludes in her opinion that the maximum rate that can be attributed in a transaction of this magnitude, as in our case, does not exceed only 1.8% of the amount of the transaction, and its findings were not contradicted in her investigation.  This, of course, is only a threshold from which the entitlement should be derived, provided that it is proven.  In any event, and alternatively, weight should also be given to Firon's claim that half (2%) of the brokerage fees claimed by the plaintiff, which was not concealed.  In any event, the rate of brokerage fees should be derived from the scope of the transaction, which stands at ILS 35 million only.  In light of the above, the eligibility rate cannot exceed only 0.18% of the scope of the transaction in the amount of ILS 35 million.
56. Katz did not act to minimize the damage, refusing to meet with the founders of Liberty in relation to an offer that was offered to him of their own free will, beyond the letter of the law, and in light of Piron's request to pay any amount of fairness. In view of her improper conduct and the risks she chose to take for herself, the plaintiff should not be entitled to any payment.
57. As to the alternative legal constructions, the plaintiff did not prove anything of the existence of a "trade secret", which is worthy of protection and is under her lawful control. The plaintiff did not prove at the required level of proof that the alleged information regarding the fact that Pitkit was offered for sale was not the domain of other parties in the market, and the fact is that in the Pitkit brokerage agreement, the plaintiff was not granted an exclusive right. In addition, after Matan violated the confidentiality and the memorandum of understanding, and disclosed information about Pikit to non-bank entities, while making it public, it is clear that this is no longer a trade secret.  The plaintiff also did not prove that Liberty and Shahar took the information by improper means, and in any case it was proven that they acted in good faith and not with the aim of thwarting the plaintiff's action, as evidenced by their attempts to reach understandings with her, beyond the letter of the law.
58. The grounds for unjust enrichment are not met. Liberty and Shahar did not receive anything from the plaintiff. The Liberty deal is the product of an independent and separate process by the parties, which was conducted directly between them.  In the absence of a real connection between the plaintiff's alleged action and the transaction that was signed, it cannot be determined that any of the defendants enriched themselves at her expense.  It is not possible, through the law of enrichment, to skip the laws of brokerage and the requirements set out in the case law for proving entitlement to brokerage fees, which the plaintiff did not meet.
59. The cause of action for breach of contract also lacks factual and legal basis. In the absence of a binding agreement between the plaintiff and Liberty and Shahar, and in the absence of any breach of contract on their part, the required basis for imposing liability does not exist.
60. The plaintiff's version collapsed in her witnesses' cross-examinations. Katz's testimony was replete with contradictions, evasions and suppressed versions, and he even remained in the courtroom despite the court's clarification regarding the significance of this step. Matan refrained from answering substantive questions, and there was concern that he would coordinate versions with him, as the plaintiff chose which documents to present from those he had forwarded.

Haimi's testimony was tainted by personal interest, and he admitted that the salary interested him even though he tried to present himself as someone who acted without compensation.