On February 6, 2025, a group of over 100 institutional investors, represented by Frank Peters and Anita van Wees of Dutch litigation boutique Rubicon Impact & Litigation, sent a demand letter to Koninklijke Philips N.V. (Philips) seeking over EUR 800 million in damages.
The claims are based on Philips’ withholding critical health risks associated with its sleep and respiratory care devices, known as Continuous Positive Airway Pressure (CPAP) and Bi-Level Positive Airway Pressure (Bi-PAP) machines. These devices which are widely used to treat sleep apnea and other respiratory conditions utilize polyester-based polyurethane (PE-PUR) foam for sound abatement. As early as 2015, Philips was aware that this foam could degrade into carcinogenic particles, posing serious health risks to users, including headaches, dizziness, irritation, and even death from cancer. Despite this knowledge, Philips failed to disclose these risks to the public, regulators, or investors. Instead, the company continued to manufacture, market, and sell these devices, generating substantial profits. It wasn’t until April 2021 that Philips finally and timidly disclosed the health issues in its quarterly results and started to recall the faulty devices.
The consequences for shareholders of Philips’ misconduct have been substantial. Between April 2021 and January 2024, Philips’ stock price dropped multiple times following various recalls and disclosures about regulatory investigations. In total, the company’s market capitalization plummeted by nearly EUR 28 billion over this time span and caused significant losses to its shareholders, including the group of shareholders currently launching a demand against the company.
“Philips’ willful and intentional negligence to inform the market of the severe risks associated with the PE-PUR foam used on its CPAP and Bi-PAP machines had critical and material consequences to both consumers and investors” said DRRT’s Managing Partner, Joseph Gulino, who is advising many institutional investors which are part of the group. He added “Philips must now hold itself accountable to shareholders that are seeking remedy for Philips’ failure to disclose information, a key component to a transparent and efficient financial market.”