Invacare 2015 Annual Report Download - page 38

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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. The independent third-party expert
auditor's third certification report, as well as the company's own report, both 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.
After resumption of full operations, the company must undergo five years of audits by a third-party expert auditor to determine
whether the facilities are in continuous compliance with FDA regulations and the consent decree. The auditor will inspect the
Corporate and Taylor Street facilities’ activities every six months during the first year following the resumption of full operations
and then once every 12 months for the next four years thereafter.
Under the consent decree, the FDA has the authority to inspect the Corporate and Taylor Street facilities at any time. The
FDA also has the authority to order the company to take a wide variety of actions if the FDA finds that the company is not in
compliance with the consent decree or FDA regulations, including requiring the company to cease all operations relating to Taylor
Street products. The FDA also can order the company to undertake a partial cessation of operations or a recall, issue a safety alert,
public health advisory, or press release, or to take any other corrective action the FDA deems necessary with respect to Taylor
Street products.
The FDA also has authority under the consent decree to assess liquidated damages of $15,000 per violation per day for any
violations of the consent decree, FDA regulations or the federal Food, Drug, and Cosmetic Act. The FDA also may assess liquidated
damages for shipments of adulterated or misbranded devices, except as permitted by the consent decree, in the amount of twice
the sale price of any such adulterated or misbranded device. The liquidated damages are capped at $7,000,000 for each calendar
year. The liquidated damages are in addition to any other remedies otherwise available to the FDA, including civil money penalties.
For additional information regarding the consent decree, please see the following sections of this Annual Report on Form
10-K: Item 1. Business - Government Regulation; Item 1A. Risk Factors; and Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Outlook and - Liquidity and Capital Resources.
In December 2010, the company received a warning letter from the FDA related to quality system processes and procedures
at the company's Sanford, Florida facility. In January 2014, the FDA conducted inspections at the company’s manufacturing facility
in Suzhou, China and at the company’s electronic components subsidiary in Christchurch, New Zealand, covering quality systems
and current Good Manufacturing Practice regulations. In August 2014, the FDA inspected Alber GmbH in Albstadt, Germany.
The FDA issued its inspectional observations on Forms 483 to the company after these inspections, and the company submitted
its responses to the agency in a timely manner. In October 2014, the FDA conducted an inspection at the Sanford facility and, at
the conclusion, issued its Form 483 inspectional observations. In December 2015, the FDA issued Form 483 observations following
a 2015 inspection of approximately 5 months at the Corporate and Taylor Street facilities in Elyria, Ohio which included a review
of the company’s compliance with terms of the consent decree and the matters covered by the first and second expert certification
reports previously accepted in 2013. The company has timely filed its responses to these Forms 483 with the FDA and continues
to work on addressing the FDA's observations. The results of regulatory claims, proceedings, investigations, or litigation are
difficult to predict. An unfavorable resolution or outcome of the FDA warning letter or other FDA enforcement related to the
Sanford facility or other company facilities could materially and adversely affect the company's business, financial condition, and
results of operations. See Item Item 1. Business - Government Regulation - Other FDA Matters and 1A. Risk Factors in this Annual
Report on Form 10-K.
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 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 amount 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