The suit, originally filed in the Southern District of New York and transferred to the Central District of California, alleged that Mr. Kiani, the former CEO and chairman of Masimo’s board, secretly colluded with RTW Investments to manipulate a 2024 shareholder vote through an “empty voting” conspiracy in an unsuccessful attempt to defeat a proxy campaign waged by the activist hedge fund Politan Capital Management.
“This lawsuit was filed by Politan-controlled Masimo as an effort to avoid paying Mr. Kiani what he is owed under his 10-year-old employment agreement,” said Hueston Hennigan partner John Hueston. “The claim of an ‘empty voting’ conspiracy between Kiani and RTW was meritless. Politan made this same allegation during the 2024 proxy contest, and it was investigated by Masimo’s lead independent director and rejected as untrue. After Politan-controlled Masimo terminated Kiani, it resurrected this claim in the hopes of finding a basis to avoid paying Kiani what he is owed under his employment agreement. But now, to avoid a neutral judge’s scrutiny, Politan-controlled Masimo chose to dismiss the claim rather than face another contested loss.”
Mr. Kiani founded health technology company Masimo in his garage 35 years ago and served as its chairman and CEO from its founding in 1989 through September 2024. Politan waged a proxy contest that ousted Mr. Kiani from his seat as chairman of the Board of Directors, and gave its directors majority-control over the board, which immediately initiated its plan to remove Mr. Kiani from management. Mr. Kiani announced his resignation as CEO and sought a declaratory judgment in Orange County Superior Court that he was entitled to contractually guaranteed termination wages under his employment agreement. Weeks later, the Politan-controlled board pretextually terminated Mr. Kiani for “cause” in an invalid effort to avoid the contractual payments to which Mr. Kiani is entitled.
The day after it terminated Mr. Kiani, Politan-controlled Masimo sued Mr. Kiani and the hedge fund RTW Investments in the Southern District of New York, alleging that Mr. Kiani and RTW formed a “group” under Section 13(d) of the Securities Exchange Act during the company’s September 2024 proxy contest without filing the required Schedule 13D.
Mr. Kiani moved to dismiss the complaint, and after Masimo amended the complaint, moved to dismiss it again. The amended complaint alleged only that Mr. Kiani had communicated with Masimo’s key shareholders, including RTW, about a critical, upcoming proxy contest that would determine the future of the company. RTW independently believed that Masimo would perform better in the future with Mr. Kiani retaining his positions rather than an activist hedge fund whose principals had no relevant experience. As argued by Hueston Hennigan, had Politan-controlled Masimo succeeded in its lawsuit against Mr. Kiani and RTW based on these allegations, it would have meant that a company’s management formed a “group” under Section 13(d) of the Exchange Act any time that a company’s directors communicate with its key investors and those investors independently decide to support the company’s management, a result unsupported by case law and SEC regulations.
On the eve of the hearing on Mr. Kiani’s motion to dismiss for failure to state a claim, Politan-controlled Masimo voluntarily dismissed its claim against Mr. Kiani, conceding it was without basis. Mr. Kiani continues to litigate his claims for the termination benefits in the Orange County Superior Court, which recently denied Masimo’s heavily contested motion to stay the case.
In addition to Mr. Hueston, the team representing Mr. Kiani in the Section 13(d) lawsuit includes Marshall Camp, Thomas Zaccaro, Adam Minchew, Bram Alden, and Stewart Rickert.
