LOS ANGELES--(BUSINESS WIRE)--A Los Angeles jury on Friday night hit Kimberly-Clark Corporation (NYSE: KMB) and Halyard Health Inc. (NYSE: HYH) with a stunning $454 Million fraud verdict due to the sale by the companies of defective medical devices to doctors, hospitals and trauma centers throughout California for years. The unanimous verdict, rendered by an eight-person Federal Court jury after hearing extensive evidence in the two-week trial, is likely one of the largest verdicts in U.S. history against a medical device maker. Pursuant to an indemnification agreement entered into between the two defendants, Halyard Health is obligated to pay the entirety of the $454 Million awarded by the jury.
The class action lawsuit, Bahamas Surgery Center, LLC v. Kimberly-Clark Corp et al, Case No. CV 14-8390-DMG, was filed in Los Angeles in United States District Court in October 2014, alleging that the defendants had committed fraud in the marketing and sale of certain of their medical gowns used in critical surgeries. In particular, the suit claimed that the companies had falsely represented to the FDA, health care workers and the general public that the company’s “Microcool Breathable High Performance Surgical Gowns” (the “Surgical Gowns”) were impermeable and provided protection against serious diseases, including Ebola and HIV, despite the fact that the companies had known since 2012 that the gowns were defective, failed industry tests, and did not meet relevant standards, thus placing healthcare professionals and patients at considerable risk for infection, serious bodily harm and death.
The jury sided with the Plaintiffs Friday and found that the companies had concealed material information from healthcare professionals throughout California and had carried out their scheme with malice, oppression and/or fraud. “This fraud verdict should send a clear message to corporations throughout the United States that concealment and cover-up are not part of doing business,” said lead attorney Michael Avenatti of Eagan Avenatti, LLP, on behalf of the Plaintiffs. “The trial was a search for the truth and the jury found it.”
The evidence presented at trial showed that Kimberly-Clark and Halyard knowingly misled the medical community, regulators and the general public about the safety of the Surgical Gowns and even after learning of multiple test failures, failed to alert the FDA, healthcare professionals and patients. Internal e-mails and documents from the companies showed employees describing the manufacturing process as “crap” and admitting that they were knowingly using defective and substandard equipment to make the gowns in Honduras. Instead of recalling the gowns and disclosing the truth, the companies concealed what they knew, fired employees who knew too much and continued promoting, marketing and selling the gowns by stating they were impermeable, even going so far as to recommend that the gowns be used when treating patients with serious infectious diseases, including Ebola and HIV.
The Plaintiffs were represented at trial by Michael Avenatti, Ahmed Ibrahim and Filippo Marchino of California-based Eagan Avenatti, LLP, together with William C. Hearon of William C. Hearon, PA, based in Miami, Florida.