Following almost a year of contentious litigation, and with trial approaching, activist investors in Masimo voluntarily dismissed their challenge to the employment and executive compensation agreement of our client, Masimo’s founder and CEO, Joe Kiani.
“Plaintiffs’ dismissal represents an important victory for Mr. Kiani,” said John Hueston. “This was a baseless attack on Mr. Kiani’s compensation agreement that was adopted eight years ago, on a clear day, and which was publicly disclosed and relied upon for years. We are glad that the Plaintiffs finally understood this.”
In October 2022, after acquiring an 8.4% ownership stake in Masimo, activist investor group Politan Capital Management initiated this litigation in the Delaware Court of Chancery. Initially, the focus of Politan’s lawsuit was on Masimo’s advance-notice bylaws, which Politan claimed were invalid and unenforceable due to their purportedly adverse effects on stockholder franchise. But soon after Masimo repealed those bylaws, mooting Politan’s claims, Politan dramatically shifted the focus of its lawsuit to focus on Mr. Kiani’s employment agreement with Masimo.
In March 2023, Politan filed an amended complaint, in which another Masimo investor, the California State Teachers Retirement Systems (CalSTRS), joined as Plaintiff, seeking to invalidate core provisions in Mr. Kiani’s employment agreement. Specifically, Plaintiffs claimed that certain compensation terms of that agreement—including those that entitle Mr. Kiani to receive, upon the occurrence of certain conditions, a one-time grant of 2.7 million restricted stock units in Masimo (equal to approximately 5% of Masimo’s market cap) and a $35 million cash payment—are invalid under Delaware law. Hueston Hennigan appeared in the litigation to represent Mr. Kiani against Plaintiffs’ challenge.
On August 18, 2023, Mr. Kiani, along with the other Defendants, filed a motion to dismiss all of Plaintiffs’ claims. Shortly thereafter, on September 6, 2023, Plaintiffs filed a motion to dismiss their lawsuit in its entirety, and the Court granted the motion the following day.
Masimo is a global medical technology company that develops, manufactures, and markets a variety of life-saving noninvasive patient monitoring technologies, hospital automation solutions, home monitoring devices, ventilation solutions, and consumer products. Masimo is best known today for its proprietary pulse oximetry technology, which is currently used to monitor over 200 million patients per year, and it is the primary pulse oximetry technology used in many of the top hospitals in the United States.
Since founding Masimo 34 years ago, Mr. Kiani has developed a proven track record as a leader and innovator whose contributions have been critical to Masimo’s success. Mr. Kiani is the co-inventor of measure through motion pulse oximetry, and his ideas and inventions have been integral to nearly every major product and service that Masimo offers. His accomplishments have been widely recognized by stockholders and others, as Masimo has substantially outperformed the market since its initial public offering in 2007.
The Hueston Hennigan team included John Hueston, Marshall Camp, Yegor Fursevich, Rajan Trehan, Lauren Johnson, Adam Minchew, Karen Ding, and Stephen Andrews.