Invacare 2014 Annual Report Download - page 117

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-47
On November 15, 2013, an amended complaint, in a lawsuit originally instituted on May 24, 2013, was filed against Invacare
Corporation, Gerald B. Blouch and A. Malachi Mixon III in the U.S. District Court for the Northern District of Ohio, alleging that
the defendants violated federal securities laws by failing to properly disclose the issues that the Company has faced with the FDA.
The lawsuit seeks class certification and unspecified damages and attorneys' fees for purchasers of the Company's common shares
between July 22, 2010 and December 7, 2011. This lawsuit has been referred to the Company's insurance carriers. The Company
intends to vigorously defend this lawsuit.
On September 12, 2014, a second amended complaint, in a lawsuit originally instituted on August 26, 2013, was filed against
Invacare Corporation, Gerald B. Blouch, A. Malachi Mixon III and Patricia Stumpp, as well as outside directors Dale C. LaPorte,
Michael F. Delaney and Charles S. Robb, in the U.S. District Court for the Northern District of Ohio, alleging that the defendants
breached their fiduciary duties and violated the Employment Retirement Security Act (ERISA) in the administration and
maintenance of the Company stock fund in the Company’s Retirement Savings Plan (401(k) Plan). The lawsuit seeks class
certification and unspecified damages and attorneys' fees for participants in the Company's stock fund of the 401(k) Plan between
February 5, 2009 and the present. This lawsuit has been referred to the Company's insurance carriers. The Company intends to
vigorously defend this lawsuit.
Medical Device Regulatory Matters
The FDA in the United States regulates virtually all aspects of the development, testing, manufacturing, labeling, promotion,
distribution and marketing of a medical device. The Company and its products are subject to the laws and regulations of the FDA
and other regulatory bodies in the various jurisdictions where the Company's products are manufactured or sold. The Company's
failure to comply with the regulatory requirements of the FDA and other applicable medical device regulatory requirements can
subject the Company to administrative or judicially imposed sanctions or enforcement actions. These sanctions include injunctions,
consent decrees, warning letters, civil penalties, criminal penalties, product seizure or detention, product recalls and total or partial
suspension of production.
In December 2012, the Company reached agreement with the FDA on the terms of the consent decree of injunction with
respect to the Company's Corporate facility and its Taylor Street wheelchair manufacturing facility in Elyria, Ohio. A complaint
and consent decree were filed in the U.S. District Court for the Northern District of Ohio, and on December 21, 2012, the Court
approved the consent decree and it became effective. The consent decree limits the Company's manufacture and distribution of
power and manual wheelchairs, wheelchair components and wheelchair sub-assemblies at or from its Taylor Street manufacturing
facility. The decree also initially limited design activities related to wheelchairs and power beds that take place at the impacted
Elyria, Ohio facilities. The Company is entitled to continue to produce from the Taylor Street manufacturing facility certain
medically necessary wheelchairs provided that documentation and record-keeping requirements are followed, as well as ongoing
replacement, service and repair of products already in use, under terms delineated in the consent decree. Under the terms of the
consent decree, in order to resume full operations at the impacted facilities, the Company must successfully complete a third-party
expert certification audit at the impacted Elyria facilities, which is comprised of three distinct reports that must be submitted to,
and accepted by, the FDA. After the final certification report is submitted to the FDA, as well as the Company’s own report as to
its compliance status together with its responses to any observations in the certification report, the FDA is expected to inspect the
Company's Corporate and Taylor Street facilities to determine whether they are in compliance with the Quality System Regulation
(QSR) governing the manufacture of medical devices and the terms of the consent decree. If the FDA is satisfied with the Company's
compliance, the FDA will provide written notification that the Company is permitted to resume full operations at the impacted
facilities.
During 2013, the Company completed the first two of the expert certification audits, and the FDA found the results of both
to be acceptable. In these reports, the third-party expert certified that the Company's equipment and process validation procedures
and its design control systems are compliant with the FDA's QSR. As a result of the FDA's acceptance of the first certification
report on May 13, 2013, the Taylor Street facility was able to resume supplying parts and components for the further manufacturing
of medical devices at other Company facilities. The Company's receipt of the FDA's acceptance of the second certification report
on July 15, 2013, resulted in the Company being able to resume design activities at the impacted facilities related to power
wheelchairs and power beds.
The third, expert certification audit is an overall review of the Company's compliance with the FDA's QSR at the impacted
Elyria facilities. This audit process is the most comprehensive and challenging of the three expert certification audits, and it
encompasses all areas of the Company's Corporate and Taylor Street quality system. As part of this process, the Company has
determined that it needs to better demonstrate that its quality system is sustainably compliant and that each subsystem is properly
integrated. With the help of a consulting firm the Company engaged in 2014, the Company is executing on its action plans to