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Perrigo's $163.5M Tax Trial Dates Canceled Amid Virus

By Theresa Schliep · April 28, 2020, 6:15 PM EDT

A Michigan federal judge Tuesday canceled trial dates scheduled in Perrigo's $163.5 million tax refund suit because of health concerns surrounding the coronavirus and said the trial could not proceed by video because of the complexities posed by the case.

An in-person trial will be necessary to litigate the drugmaker's suit to recoup $163.5 million in taxes, penalties and interest associated with its agreement with Israel's Dexcel Pharma Technologies Ltd. to distribute a heartburn medication, Chief Judge Robert J. Jonker said. The judge declined to replace the canceled proceedings scheduled to begin May 26 with a video trial, saying that while the court has gotten some practice holding sessions by video, technical complexities and the wealth of exhibits in the case require in-person proceedings to ensure the trial's fairness.

"The court cannot imagine a trial where all witnesses were examined by remote video, particularly with the mass of exhibits in play here and the technical complexity of some of the issues," Judge Jonker said in an order.

Judge Jonker also said it would be difficult to schedule an in-person trial by the end of 2020, considering the backlog of criminal proceedings that take priority because of constitutional considerations and the anticipated two weeks needed to jostle over Perrigo's claims, according to the order. But holding off until a consecutive trial can take place instead of segmenting the proceedings would produce better results, he said.

On Monday, Perrigo and the U.S. asked the court to cancel the original trial scheduled to begin May 26, saying both parties had concerns over sending trial teams and witnesses to Michigan during the pandemic. The U.S. was willing to conduct a virtual trial, but Perrigo told the court that in-person witness testimony was needed to fully determine the credibility of the fact and expert witnesses.

The drugmaker sued the government in August 2017 looking to recoup the $163.5 million from tax assessments spanning 2009 through 2012. The U.S. has claimed that Perrigo created an Israeli subsidiary, Perrigo Israel LLC, as an "empty box" that existed only on paper in order to shift earnings from drug contracts offshore and out of the reach of the Internal Revenue Service, according to court documents.

U.S. Magistrate Judge Phillip J. Green in February partially permitted Dexcel to intervene in the suit to protect certain proprietary information during the proceedings. Dexcel has an agreement with Perrigo for the distribution of generic drugs with the active ingredient omeprazole.

A representative for Perrigo declined to comment. Legal representatives for the U.S. were not immediately available to comment.

Perrigo is represented by John B. Magee, Alex E. Sadler, Drew A. Cummings, Thomas V. Linguanti and Jason D. Dimopoulos of Morgan Lewis & Bockius LLP and Edward J. Bardelli of Warner Norcross & Judd LLP.

The U.S. is represented by James Weaver and Arie Rubenstein of the U.S. Department of Justice, Tax Division.

The case is Perrigo Co. v. U.S., case number 1:17-cv-00737, in the U.S. District Court for the Western District of Michigan.

--Additional reporting by Dylan Moroses, David Hansen and Alex Parker. Editing by Vincent Sherry. 

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