Invacare 2015 Annual Report Download - page 120

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-48
On November 15, 2013, an amended complaint, in a lawsuit originally instituted on May 24, 2013, was filed against Invacare
Corporation, former officer and director Gerald B. Blouch and former officer and director 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 sought class certification and unspecified damages and attorneys'
fees for purchasers of the company's common shares between February 27, 2009 and December 7, 2011. After mediation, the
parties agreed to settle the matter, which agreement was fully and finally approved by the Court on November 19, 2015, and the
case was dismissed. The settlement was paid entirely by the company’s insurance carriers.
On September 12, 2014, a second amended complaint, in a lawsuit originally instituted on August 26, 2013, was filed against
Invacare Corporation, former officer and director Gerald B. Blouch, former officer and director A. Malachi Mixon III and the
Company's senior Vice President, Human Resources, Patricia Stumpp, as well as outside directors Dale C. LaPorte and Michael
F. Delaney and former outside director 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 Employee Retirement Income 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 July 22, 2010 and the present. On August 28, 2015, the Court limited plaintiff’s claim to the time period between
July 22, 2010 and December 8, 2011. 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 and comparable medical device regulatory authorities in other jurisdictions regulate virtually
all aspects of the marketing, invoicing, documenting, development, testing, manufacturing, labeling, promotion, distribution and
other practices regarding medical devices. 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. During 2013, the company completed the first two of the third-party 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. In February, 2016, the independent expert auditor issued its certification report for the third
phase of the consent decree indicating substantial compliance to the FDA's QSR, and the report has been submitted to the FDA.
Per the terms of the consent decree, the company must submit its own report to the FDA regarding its compliance status
together with its written responses to any observations in the independent expert's report. Both the independent expert auditor's
third certification report as well as the company's own report must be accepted by the FDA before the agency reinspects the
impacted Elyria facilities. 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. The company cannot predict the acceptance of these
reports by the FDA, nor any remaining work that may be needed to meet the FDA's requirements. The FDA has the authority to
inspect any FDA registered facility at any time.