An Amsterdam court has delivered a favorable ruling for Royal Philips NV, rejecting investor requests for an investigation into the company's handling of its 2021 recall of sleep apnea devices. According to reports from Reuters, the court on Saturday dismissed demands by shareholders for a court inquiry into allegations of misleading disclosures and management failures linked to the massive recall. The Enterprise Chamber of the Amsterdam Court of Appeal found no basis to justify a probe into the recall that sparked a sharp decline in the medical device maker's share price. The court ruled that there was no reason to assume Philips ought to have intervened at Respironics earlier or that the Supervisory Board exercised insufficient oversight. As reported by Reuters, the judge has rejected the requests of the Dutch Securities and Exchange Commission (VEB) and a large group of investors for an in-depth investigation into Philips.
Dutch investors' association VEB and several institutional investors contended that shortcomings in Philips' internal systems meant the problems with the devices were identified and addressed too late. As reported by Reuters, a large group of shareholders had demanded a court inquiry, as they said Philips executives had responded too late to the problems that led to the massive recall and had failed to adequately inform investors. The investors argued that sufficient reliable research data indicating health risks associated with the PE-PUR foam used in the devices didn't come available until early 2021. According to Reuters, a large group of investors had sought the investigation, supporting allegations that Philips executives acted too slowly and failed to adequately inform investors about the problems. However, the court's dismissal of these demands provides definitive backing for Philips' actions.
In 2021, Philips launched a global recall of approximately 15 million ventilators and sleep apnea devices from its American subsidiary Respironics. According to Reuters, the recall took place after discovering that their foam could release harmful substances and pose health risks. The recall involved roughly 3.5 million breathing machines, with the company agreeing to a $1.1 billion settlement in the US in 2024 to resolve class action lawsuits related to the widespread recall. As reported by Reuters, in 2024 Philips agreed to pay $1.1 billion to settle all personal injury claims related to the devices filed in the US. The recall stemmed from the polyester-based sound dampening foam inside the machines degrading over time, potentially allowing toxic or carcinogenic particles to be inhaled or ingested.
Philips shares have fallen 6.3% this year and the company welcomed the court decision. As reported by Reuters, the court didn't rule on questions of whether errors were made at Respironics or of liability for damages suffered by investors, leaving these matters open for future consideration. According to Reuters, the court found no indication that Philips knew about the problems much earlier or that its executives should have acted sooner, supporting the company's position that it responded appropriately to the situation. The court's backing of Philips' actions provides crucial legal protection against ongoing investor allegations regarding the recall handling.
