As expected, Masimo’s former CEO has filed to dismiss two lawsuits brought against him by Masimo’s new management. These were filed in the US District Court for the Southern District of New York on 23 January and in Delaware Chancery Court on 17 January.
The Southern District New York lawsuit by medical device manufacturer Masimo alleges that Kiani and RTW Investments, plus 10 individuals and associated RTW entities, formed a group that violated Federal securities laws by manipulating last year’s Annual Shareholder Meeting vote on directors’ seats through a secret ’empty voting’ scheme that acquired 19% of shares [TTA 15 Nov 2024]. Kiani and RTW did this without filing a Schedule 13D as a group.
RTW was already a significant shareholder–it is a $6.5 billion hedge fund–and the Kiani filing claims that contact by him was routine and about the shareholder meeting; any claim that Kiani and RTW acted as a group is ‘untenable’. Masimo, now controlled by Politan Capital Management, in its suit alleged “actual and imminent injury” among other damaging claims. The vote went against Kiani and his directors on 19 September 2024 ending their efforts. Kiani is seeking dismissal on the grounds that the lawsuit is an effort to coerce him to abandon efforts in California State Court to collect his contractually specified $400 million severance.
Kiani resigned from Masimo on 19 September 2024, the day of the Annual Shareholders Meeting, “for good reason” after losing his board seat and control of the company. However, management placed him on a 30-day “cure” leave, named an interim CEO, expanded the board by two directors, then formally terminated him earlier on 24 October ‘for cause’, invalidating the terms of his latest severance agreement.
The SDNY filing requests dismissal and alternatively, transfer to the US District Court for the Central District of California. Both Masimo and Kiani reside in Orange County.
Kiani’s Delaware Chancery Court filing requests dismissal of Masimo’s charges against the severance agreement as filed in the improper venue. Alternatively, it should be transferred to the earlier Kiani lawsuit against Masimo filed on 19 September 2024–immediately after the shareholder meeting loss–in California State Court [TTA 15 Nov 2024].
At this point, there is no estimate of when either court will rule on these filings.
These filings are separate from the SEC investigation of the “empty voting” scheme and whether Kiani and RTW formed an insider group in the proxy fight [TTA 6 Dec 2024, hat tip Strata-gee], but cover much the same ground as the SDNY lawsuit.
Disclosure: This Editor received both filings and information from a strategic communications representative of Joe Kiani. The interpretations and summaries of the filings are your Editor’s. Mr. Kiani’s counsel’s statement is below:
“Politan continues to waste Masimo shareholder resources on a scorched-earth campaign to avoid paying Mr. Kiani what he is rightfully owed after delivering enormous value to shareholders and patients during his 35-year tenure at the helm of the company he founded in his garage. Immediately after being forced out of Masimo following Politan’s hostile takeover, Mr. Kiani anticipated that the Politan-led Board would try to withhold his severance benefits, and he brought a lawsuit in California to enforce his contract. As detailed in that complaint, Mr. Kiani has an unambiguous contractual right to the compensation he is seeking under his 10-year-old employment agreement, which was approved by shareholders in seven different votes and stemmed from a prior agreement entered into 30 years ago. The misplaced and meritless lawsuits subsequently filed by Masimo in Delaware and New York are part of a coordinated effort to circumvent Mr. Kiani’s lawsuit and evade jurisdiction in California, and they should be dismissed. We are confident that when these matters are fully litigated, the facts will demonstrate that Mr. Kiani is entitled to his severance compensation.”
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