Halyard Health, Inc. (NYSE:HYH) Files An 8-K Regulation FD Disclosure
Item 7.01 Regulation FD Disclosures.
Summary
In late 2014, Bahamas Surgery Center, LLC (Bahamas) brought a class
action lawsuit in California against Kimberly-Clark Corporation
(Kimberly-Clark) and Halyard Health, Inc. (Halyard Health),
alleging the companies had concealed information regarding
MICROCOOL* Surgical Gowns.
action lawsuit in California against Kimberly-Clark Corporation
(Kimberly-Clark) and Halyard Health, Inc. (Halyard Health),
alleging the companies had concealed information regarding
MICROCOOL* Surgical Gowns.
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Among other allegations, Bahamas claims purchasers of
MICROCOOL* gowns would have paid less for the gowns if the allegedly concealed information had been known to them. |
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The jury found against Kimberly-Clark and Halyard and awarded
both compensatory and punitive damages. We expect the court to reduce the award of punitive damages to align with constitutional limits. |
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Halyard Health continues to stand by MICROCOOL* gowns, which
Halyard Health believes have always been, and remain today, safe and effective for their intended use. |
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We do not believe the verdict is supported by the facts or
the law, and we intend to file post-trial motions and, if necessary, appeal. |
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We believe that the ultimate resolution of this lawsuit will
not materially impact Halyard Healths liquidity, its access to capital markets, or its ability to conduct its daily operations. We look forward to continuing to serve our customers needs with products that are safe and effective. |
Case Details
In late 2014, Bahamas brought a class action lawsuit in the U.S.
District Court for the Central District of California alleging that
from February 12, 2012 through January 11, 2015 (Class Period),
Defendants Kimberly-Clark and Halyard Health concealed certain
information regarding MICROCOOL* Breathable High Performance
Surgical Gowns purchased by a class of private California
end-purchasers during the Class Period. Among other allegations,
Plaintiff claims that purchasers of the MICROCOOL* gowns would have
paid less for the gowns if the allegedly concealed information had
been known to them.
District Court for the Central District of California alleging that
from February 12, 2012 through January 11, 2015 (Class Period),
Defendants Kimberly-Clark and Halyard Health concealed certain
information regarding MICROCOOL* Breathable High Performance
Surgical Gowns purchased by a class of private California
end-purchasers during the Class Period. Among other allegations,
Plaintiff claims that purchasers of the MICROCOOL* gowns would have
paid less for the gowns if the allegedly concealed information had
been known to them.
Defendants deny Plaintiffs contentions, maintain that the
MICROCOOL* gowns are safe and effective and have always complied
with the 2003 AAMI PB70 standard under which the gowns were cleared
by the U.S. Food and Drug Administration (FDA) in December 2010.
The Defendants also deny that they concealed material information
from purchasers. Defendants therefore deny liability and deny that
Plaintiff or the class members are entitled to any of the relief
they seek.
MICROCOOL* gowns are safe and effective and have always complied
with the 2003 AAMI PB70 standard under which the gowns were cleared
by the U.S. Food and Drug Administration (FDA) in December 2010.
The Defendants also deny that they concealed material information
from purchasers. Defendants therefore deny liability and deny that
Plaintiff or the class members are entitled to any of the relief
they seek.
On April 7, 2017, after a two-week trial, a jury returned a verdict
for Plaintiff, finding that Kimberly-Clark was liable for
$3,889,327 in compensatory damages (not including prejudgment
interest) and $350,000,000 in punitive damages, and that Halyard
was liable for $261,445 in compensatory damages (not including
prejudgment interest) and $100,000,000 in punitive damages.
for Plaintiff, finding that Kimberly-Clark was liable for
$3,889,327 in compensatory damages (not including prejudgment
interest) and $350,000,000 in punitive damages, and that Halyard
was liable for $261,445 in compensatory damages (not including
prejudgment interest) and $100,000,000 in punitive damages.
As discussed in Halyard Health’s Annual Report on Form 10-K for
the year ended December 31, 2016, as well as in other reports
furnished to the SEC, we believe that we are obligated to indemnify
Kimberly-Clark for its share of any final judgment in this case
under the terms of the Distribution Agreement we entered into with
Kimberly-Clark on October 31, 2014.
the year ended December 31, 2016, as well as in other reports
furnished to the SEC, we believe that we are obligated to indemnify
Kimberly-Clark for its share of any final judgment in this case
under the terms of the Distribution Agreement we entered into with
Kimberly-Clark on October 31, 2014.
Halyard Intends to File Motions to Challenge the Verdict and, if
Necessary, to Appeal
Necessary, to Appeal
Halyard Health is disappointed with the jurys verdict. We
recognize, though, that it is just the first step of a multi-step
legal process. We believe the verdict is not supported by the facts
or the law, and we intend to challenge it through post-trial
motions and, if necessary, on appeal to a higher court.
recognize, though, that it is just the first step of a multi-step
legal process. We believe the verdict is not supported by the facts
or the law, and we intend to challenge it through post-trial
motions and, if necessary, on appeal to a higher court.
For instance, in the coming weeks Halyard Health intends to file a
motion for judgment notwithstanding the verdict, which will argue
that the Court should reverse the jurys verdict in whole or in part
because it was based on insufficient facts and/or did not correctly
apply the law. As an alternative, Halyard Health may seek a new
trial. Additionally, Halyard Health intends to challenge the jurys
punitive damages award. The U.S. Supreme Court has stated that the
constitutional outer limit for the ratio between punitive damages
and compensatory damages in cases such as ours is 9 to 1 or lower,
and in our case we believe the ratio should be lower. Halyard
Health intends to rely on this and other legal authority in seeking
to reduce the jurys punitive award, which totaled more than 100
times the compensatory damages assessed against Defendants
(including a ratio of approximately 382 to 1 as to Halyard Health).
motion for judgment notwithstanding the verdict, which will argue
that the Court should reverse the jurys verdict in whole or in part
because it was based on insufficient facts and/or did not correctly
apply the law. As an alternative, Halyard Health may seek a new
trial. Additionally, Halyard Health intends to challenge the jurys
punitive damages award. The U.S. Supreme Court has stated that the
constitutional outer limit for the ratio between punitive damages
and compensatory damages in cases such as ours is 9 to 1 or lower,
and in our case we believe the ratio should be lower. Halyard
Health intends to rely on this and other legal authority in seeking
to reduce the jurys punitive award, which totaled more than 100
times the compensatory damages assessed against Defendants
(including a ratio of approximately 382 to 1 as to Halyard Health).
The jurys finding of liability is limited to a one-count
fraud-by-omission claim under Californias common law. To find in
favor of the Plaintiff, the jury was required to find that
Defendants intended to deceive Plaintiff from February 2012 through
January 2015 by failing to disclose certain material facts
regarding MICROCOOL* gowns purchased by Plaintiff, and that
Defendants concealment was a substantial factor in causing
Plaintiffs economic harm. Because the Court used a general verdict
form, the form does not identify the material facts the jury
believed were concealed.
fraud-by-omission claim under Californias common law. To find in
favor of the Plaintiff, the jury was required to find that
Defendants intended to deceive Plaintiff from February 2012 through
January 2015 by failing to disclose certain material facts
regarding MICROCOOL* gowns purchased by Plaintiff, and that
Defendants concealment was a substantial factor in causing
Plaintiffs economic harm. Because the Court used a general verdict
form, the form does not identify the material facts the jury
believed were concealed.
MICROCOOL* Gowns are Safe and Effective
The Plaintiffs case was about alleged economic harm (money), not
personal injury. The jurys verdict does not mean that MICROCOOL*
gowns fail to comply with the standard under which they were
cleared. Halyard Health continues to stand by MICROCOOL* gowns,
which Halyard Health believes have always been, and remain today,
safe and effective for their intended use. External, highly
credentialed experts who have reviewed relevant facts in our case
agree. One of those experts is a former FDA reviewer and another is
an expert on infectious diseases. Also, the real-world experience
of our customers has confirmed the experts conclusions. Complaints
of strikethrough-i.e., the passage of blood or other bodily fluids
through the MICROCOOL* gowns barrier protection technology-have
always been exceedingly low. At all times, the rates of
strikethrough complaints received by Halyard Health have remained
less than 1 complaint for every million gowns sold. To date we have
sold nearly 70 million MICROCOOL* gowns, and there have been zero
complaints of injury due to barrier protection.
personal injury. The jurys verdict does not mean that MICROCOOL*
gowns fail to comply with the standard under which they were
cleared. Halyard Health continues to stand by MICROCOOL* gowns,
which Halyard Health believes have always been, and remain today,
safe and effective for their intended use. External, highly
credentialed experts who have reviewed relevant facts in our case
agree. One of those experts is a former FDA reviewer and another is
an expert on infectious diseases. Also, the real-world experience
of our customers has confirmed the experts conclusions. Complaints
of strikethrough-i.e., the passage of blood or other bodily fluids
through the MICROCOOL* gowns barrier protection technology-have
always been exceedingly low. At all times, the rates of
strikethrough complaints received by Halyard Health have remained
less than 1 complaint for every million gowns sold. To date we have
sold nearly 70 million MICROCOOL* gowns, and there have been zero
complaints of injury due to barrier protection.
Halyard has Robust Manufacturing Processes and Quality Systems
Halyard Health is proud of its robust manufacturing processes and
quality systems. As a manufacturer of medical devices, Halyard is
regulated by the FDA, and Halyards quality systems are subject to
periodic inspection by FDA investigators. We believe that we have
done an exemplary job of putting in place quality systems and
processes that meet the needs of our customers, and we have always
responded proactively to any issues identified by FDA.
quality systems. As a manufacturer of medical devices, Halyard is
regulated by the FDA, and Halyards quality systems are subject to
periodic inspection by FDA investigators. We believe that we have
done an exemplary job of putting in place quality systems and
processes that meet the needs of our customers, and we have always
responded proactively to any issues identified by FDA.
The Ultimate Resolution of this Lawsuit Is Not Expected to
Materially Impact Halyard
Materially Impact Halyard
We believe that the ultimate resolution of this lawsuit will not
materially impact Halyard Healths liquidity, its access to the
capital markets, or its ability to conduct its daily operations. We
look forward to continuing to serve our customers needs with
products that are safe and effective.
materially impact Halyard Healths liquidity, its access to the
capital markets, or its ability to conduct its daily operations. We
look forward to continuing to serve our customers needs with
products that are safe and effective.
We appreciate the trust that our customers have in us and our
products, and we will continue to fulfill our mission of advancing
health and healthcare by preventing infection, eliminating pain and
speeding recovery.
products, and we will continue to fulfill our mission of advancing
health and healthcare by preventing infection, eliminating pain and
speeding recovery.
About Halyard Health, Inc. (NYSE:HYH)
Halyard Health, Inc. seeks to advance health and healthcare by preventing infection, eliminating pain and speeding recovery. The Company operates through two segments: Surgical and Infection Prevention (S&IP) and Medical Devices. Its S&IP business provides healthcare supplies and solutions that target the prevention of healthcare associated infections. The Medical Devices segment provides a portfolio of product offerings focused on pain management and respiratory and digestive health. The S&IP segment’s product portfolio includes sterilization wrap, surgical drapes and gowns, facial protection, protective apparel and medical exam gloves. The S&IP segment is also a provider of education to prevent healthcare-associated infections. The Medical Devices segment provides a portfolio of product offerings focused on pain management and respiratory and digestive health. Its products include QUICK CHECK, SMART-FOLD, POWERGUARD, MICROCOOL and FLUIDSHIELD. Halyard Health, Inc. (NYSE:HYH) Recent Trading Information
Halyard Health, Inc. (NYSE:HYH) closed its last trading session down -0.73 at 38.45 with 371,526 shares trading hands.
