US investment firm Politan Capital has been found in contempt of court amid an ongoing dispute with medical device giant Masimo as the investment firm seeks to reselect the company’s board of directors.
A US court ruling found Politan Capital, which is seeking to appoint its own directors to the company, committed contempt of court when it released a 12 September press release on court proceedings despite being subject to a sealing order.
Masimo’s current board of directors has called on its investors to vote against Politan Capital’s attempted imposition of its own board members in the 19 September meeting that would effectively oust the company’s current CEO Joe Kiani as part of a take-over of the company’s upper management.
The statement follows after the US Court for the Central District of California ruled that Politan Capital and Quentin Koffey are in contempt of court in connection with a September 12, 2024 violation of a court order. At the hearing, the court stated that a reasonable stockholder would consider Politan and Quentin Koffey’s contempt when evaluating the arguments of both parties ahead of the upcoming 2024 meeting.
The ruling stated that Politan Capital breached a seal order made by the courts not to disclose certain legal documents. It came in response to a press release made by the company on September 12 that detailed court proceedings that were beholden to that seal order. The court order read: “Politan’s disclosure gave it an unfair advantage in the proxy fight because, so long as Masimo was bound by the sealing order, it could not meaningfully reply to Politan’s press release.”
The court did not issue an injunction because Masimo did not sufficiently plead economic loss as a result of Politan’s statements and in light of Politan’s corrective disclosures made in response to the litigation.
In an official statement, Masimo asked investors to back current management, saying: “The ruling further validates our view that Politan and Quentin Koffey are not qualified to lead Masimo. They do not have a plan for the business or the leadership team, and lack relevant expertise needed to build on our financial momentum. And, today, a federal Judge held them in contempt of court.
“This underscores a clear lack of integrity and commitment to operating in an ethical manner. In contrast, Masimo has always acted with integrity, keeping the best interests of patients and stockholders at the forefront of our thinking.”
In its initial letter to investors on 26 June, Politan Capital sought to elect its two nominees: former CTO of Agilent, Darlene Solomon; as well as former CFO of Stryker, William Jellison to the Masimo board. In that letter Quentin Koffey, managing partner at Politan Capital, argued that the change was necessary to protect Masimo’s future value for all shareholders. Politan Capital claims Masimo is operating under “broken governance” and with “egregious CEO benefits”.
Responding to the court ruling, and speaking through legal firms Schulte Roth & Zabel and Munger, Tolles & Olson, a statement from Politan Capital reads: “We respectfully disagree with the court’s ruling that Politan violated a sealing order. It was our understanding that while the contents of the order were under seal, the outcome of the motion was not.
“Both of our firms understood that Politan could announce the outcome of the motion, and both of our firms reviewed and approved Politan’s 12 September press release before it was issued. While we do not agree with the court’s ruling, we appreciate that the court denied Masimo’s efforts today to prevent Politan from voting, and denied without prejudice Masimo’s attempt today to further delay the upcoming 2024 Annual Meeting of Stockholders.”
The announcement follows a few months after Masimo was able to see success against US tech giant Apple over the rights to its pulse oximeter function before the US International Trade Commission.
